How EMIs can earn yield on safeguarded client funds without breaking settlement

Treasury managers at EMIs and payment institutions are sitting on yield they're not capturing. The regulatory framework permits it, so why are billions in safeguarded deposits sitting idle?

Electronic money institutions (EMIs) pool and safeguard client funds every day. Yet, they face a significant constraint: their clients' funds sit in a safeguarding account, ringfenced and waiting. Regulations require the funds back in those accounts at the end of each business day. So, the window for putting that money to work is narrow — and most of the market can't accommodate it.

The result is that billions of pooled client funds earn nothing (or close to it) every single day. This isn't a compliance problem. The regulatory framework already permits money market funds (MMFs) for safeguarding. The yield is there: 2–3%, across institutional-grade MMFs managed by the likes of BlackRock and Morgan Stanley. The problem is settlement timing.

Why most yield products don't work for EMIs

Money market funds are the standard-issue solution for institutional cash management. They're low-risk, regulated, and pay a yield. Regulators explicitly permit their use for safeguarded client funds under the EU's e-money framework.

The catch: most MMF providers settle at T+1 or later. For an EMI that needs its cash back same-day, that's a structural mismatch that makes the MMFs unusable. You can't deploy funds you need back in twelve hours if it takes twenty-four to redeem. So, the window stays closed and yield stays uncaptured.

The problem isn't unique to MMFs. Most yield-bearing instruments available to institutional treasury managers. Short-duration bond funds, overnight deposit facilities, even some government securities vehicles operate on settlement timelines that assume the investor can wait. For most institutions, that assumption holds. For EMIs operating under end-of-day safeguarding requirements, it doesn't.

The result is that EMI treasury management has historically been a constrained discipline. The tools that work for a corporate treasurer or an asset manager simply don't fit the operational reality of an e-money institution. The yield gap is a structural consequence of settlement infrastructure that was never built with EMI safeguarding windows in mind.

What the regulation actually says

The EU's e-money framework (specifically the Electronic Money Directive (EMD2) and its national transpositions) requiresEMIs to safeguard client funds either in a segregated bank account or in low-risk, liquid assets. Money market funds that meet the relevant criteria qualify under the second route.

This means using MMFs for safeguarding isn't a regulatory workaround. It's an explicitly permitted approach, provided the instruments are sufficiently liquid and low-risk. Standard MMF settlement timelines weren't designed with EMI safeguarding windows in mind and that mismatch is what has kept the yield gap open.

The relevant criteria are worth spelling out. Under EMD2 and the EBA's guidelines on safeguarding, qualifying assets must be secure, liquid, and low-risk. Institutional MMFs from regulated asset managers (the kind offered by BlackRock, Morgan Stanley, and comparable counterparties) are designed precisely to meet those criteria. The regulatory basis for using them is well-established; the operational barrier has always been settlement speed, not compliance.

It's also worth noting that the permission extends to client funds, not just an EMI's own treasury. This means the yield opportunity applies to the full pool of safeguarded deposits, which for a mid-sized EMI can be substantially larger than its own balance sheet. That's the scale of the opportunity that standard settlement timelines have kept locked.

How T+0 settlement opens the window

The reason Axiology can offer same-day in-and-out on MMFs comes down to how the trade settles. The T+0 (same day) settlement allows funds to be deployed in the morning and redeemed before closing of business, within the same operational window that EMI safeguarding rules require.

The mechanism is tokenisation at the settlement layer. When you place a subscription and the settlement happens on-chain rather than through traditional clearing, the latency drops. The fund units are issued and redeemed fast enough that an EMIs can deploy their client funds in the morning and have them back before closing of business. The exposure window matches the operational window.

The underlying funds remain exactly what they are: regulated, institutional-grade, and managed by the same counterparties of treasury managers already know.

What stays the same

MMFs are already a recognised instrument for electronic money institution’s client money safeguarding under EU e-money regulation. Compliance posture doesn't change; the funds stay in approved, liquid instruments. The only thing that changes is whether they earn while you hold them.

For CFOs and treasury managers at payment institutions without yield-bearing banking relationships, the same infrastructure applies. Onboarding is free of charge, with no minimum commitment.

In practice, that means existing treasury workflows, reporting structures, and internal approval processes remain intact. The MMF counterparties like BlackRock, Morgan Stanley, and others, are names that most treasury teams and their boards have already encountered, and in many cases already hold on approved counterparty lists. There is no new risk framework to build, no novel instrument to explain to an audit committee, and no change to how client fund balances are reported or reconciled. The operational lift is minimal by design.

EMI treasury management: closing the yield gap

As EMI volumes grow and client fund pools scale, the opportunity cost of idle safeguarding compounds. An institution managing €50M in safeguarded deposits today may be managing €150M in three years. The yield gap also grows with the business, and so does the case for closing it.

Every day that safeguarded funds sit idle is yield that doesn't compound, doesn't appear on the books, and doesn't get recovered. The infrastructure to change that exists and Axiology can offer it. Start earning today.

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