What stands behind the number in your account

The number in your account is a claim on somebody. Whether that claim is worth what it says depends entirely on rules you will never see operating.

So here they are.

It is not a bank deposit

Let us be exact, because the imprecise version is how people get hurt.

Your balance is electronic money: a redeemable claim on the authorised issuer, backed by funds safeguarded for that purpose. It is not a bank deposit. It is not covered by deposit insurance. It does not earn interest.

Anybody who tells you otherwise is either confused or selling something.

How e-money firms actually fail

Not usually by theft. The pattern is duller and far more common: balances that are not quite fully backed, a gap nobody notices because the reconciliation is a monthly report rather than a control, and then an event — a surge of redemptions, a partner failing — that turns a quiet gap into an insolvency.

Every part of that is preventable, and none of it is prevented by good intentions.

A rule that refuses

E-money may not be issued beyond cleared, safeguarded funds in the same currency, less redemptions pending and exposure reserved.

That rule is enforced at the moment of issuance. It is not a target, a dashboard or a monthly report. If the backing is not there, the issuance does not happen and the person attempting it receives an error.

Note cleared. Money that has been promised, or is in transit, or is expected tomorrow, does not count. Only money that has actually arrived backs anything.

Two reconciliations, daily, kept apart

They are kept separate because they fail for completely different reasons.

Internal: every customer wallet balance must equal the sum of its own postings. A failure here is a defect in the books themselves — an engineering problem.

External: what customers are owed must equal what is actually held in the designated accounts. A failure here is money — a treasury problem.

Run them together and you learn that something is wrong. Run them apart and you know what.

A shortfall is remedied from own funds the same day, through the same two-person control as any other reserve movement. And the daily check is release-blocking: a shortfall stops things, rather than appearing in a report somebody reads on Friday.

The pack for the worst day

Every day, a resolution pack is generated: every holder, their balance, the accounts standing behind those balances, and the procedure for returning the money.

It is hash-chained to the previous day’s, so it can be shown not to have been edited afterwards.

It describes the day nobody wants. Having it ready, current and tamper-evident is the difference between an orderly return of funds and a long, expensive argument conducted in the dark.

What it costs

Nothing. It is the condition on which balances exist at all.

What you can check

These are facts about the running platform, not adjectives. Each one is visible in the product, in the API reference or in the ledger.

• The issuance rule is enforced at the point of issuance, not reported afterwards: it refuses rather than warns.
• Two reconciliations run daily and separately — internal (every wallet against its own postings) and external (the requirement against the designated accounts) — because they fail for different reasons.
• A shortfall is remedied from own funds the same day, through the existing maker-checker on reserve movements.
• A resolution pack is generated daily and hash-chained: every holder, their balance, the accounts behind them and the procedure to return the money.
• Balances are electronic money, a redeemable claim on the authorised issuer — not a bank deposit, and the product says so rather than implying otherwise.

What it costs

Not a chargeable feature. It is the condition on which balances exist at all.

Is it switched on?

Whether this is available depends on the authorisations in place and on what the administrator of a given deployment has switched on. That changes, and an article does not — so the live answer lives on the feature page, which reads it from the platform itself: E-money and safeguarding on the features page.

Read next

• The ledger — Books that cannot be quietly edited.
• Adding money — Nothing appears until something arrived.
• Risk and compliance — Refused before, not recalled after.