A preliminary reference before the EU’s highest court will determine whether payment institutions can keep offering a currency hedging service that many smaller businesses use.
A small manufacturer in Romania owes a German supplier money in three months. It does not know exactly when the invoice will arrive or how much it will be. Rather than wait and take whatever rate the market offers on the day, it books a flexible forward contract with its payment institution, locking in a rate and drawing against it as invoices come in. The arrangement is entirely routine. EU law has not definitively settled whether the payment institution offering it needs a second licence to do so.
That gap now has a case number. Case C-339/25, Iulicris Recycling SRL v Ibanfirst SA, is a preliminary reference lodged in May 2025 by the Tribunal de l’entreprise francophone de Bruxelles before the Court of Justice of the European Union. The central question is whether a payment institution licensed under the second Payment Services Directive can offer flexible currency forward contracts to business clients, or whether doing so requires a separate authorisation as an investment firm under the Markets in Financial Instruments Directive II.
Ibanfirst, the Belgian payment institution on the receiving end of the challenge, has been offering these contracts since 2013, authorised in Belgium and passported across the European Economic Area. Its position is that the contracts are payment instruments tied to real commercial transactions rather than financial speculation, and therefore fall outside MiFID II. Its challenger takes the view that a contract allowing the client to choose the timing and amount of each drawdown against a locked rate amounts to a derivative, which is precisely what MiFID II regulates.
Both positions have merit, which is why the case reached the court. PSD2 permits payment institutions to offer currency exchange services ancillary to their core payment function.
The question is where a payment service ends and a financial instrument begins. A forward contract tied to a single commercial payment on a fixed date is nothing more than a locked exchange rate for a known obligation. Write the same contract to give the client discretion over when and how much to draw down, across a window of several months, and the product has acquired something else: optionality. EU law has different frameworks for those two things. It has not said precisely where one ends and the other begins.
Advocate General Manuel Campos Sánchez-Bordona delivered his opinion in early 2026. His opinion points clearly in one direction: payment service providers holding an authorisation under the second Payment Services Directive may offer these contracts without acquiring a separate MiFID II investment firm licence. PSD2 was designed, he argued, to let payment institutions be genuine service providers to their clients, not just conduits for moving money. Requiring a MiFID II licence for instruments genuinely tied to commercial payment activity would split a single service across two regulatory regimes in a way neither directive was designed to require.
The two frameworks were designed to operate alongside each other, but their boundary has never been clean. A payment institution within its PSD2 authorisation is not seeking a MiFID II exemption; it operates within a different regulatory framework. That significantly weakens an argument some national regulators have used to impose MiFID II obligations on payment institutions. The opinion is not binding, but it carries weight, particularly in cases that raise points of law the Court has not previously addressed. A judgment is expected in the second half of 2026 or early 2027.
The implications extend well beyond Belgium. Many payment institutions across the EU have built their business around this kind of FX hedging, serving importers, exporters and smaller businesses that have struggled to obtain competitive pricing from banks on currency. An already thin market in FX services for smaller commercial clients would get thinner.
Malta has a particular stake in this ruling. Its licensed financial services sector brings together payment institutions, electronic money institutions and crypto-asset service providers, many of them operating across the EU under passported authorisations. The Malta Financial Services Authority oversees all of these categories, even if PSD2 responsibilities are not allocated to it alone. Since March 2026, crypto-asset service providers handling electronic money tokens have faced the same underlying question in a different form: whether a single regulatory authorisation is sufficient, or whether the same activity must be licensed twice. One ruling from Luxembourg will go a long way to resolving that.
In 2024, Mario Draghi warned that overlapping regulatory requirements are becoming a structural drag on European competitiveness. This case is what that looks like in practice. If the Court takes a narrower view, many payment institutions will pull these products. Banks, rarely the cheapest providers in this market, will face less competition. The companies that rely on payment institutions for currency management will pay more, or lose access to the service altogether.
Article by Dr Ian Gauci
This article was first published in The Times of Malta of the 19 April 2026.
Photo credits: Times of Malta