7/30/2026 at 11:34:33 AM
I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level featureby badatnames
7/30/2026 at 11:56:07 AM
I've heard about similar regulatory barriers especially in finance so this does not surprise me.A long time ago I remember reading about banks that want to provide incentives for saving that amount to basically lottery tickets. The idea is that people aren't thrilled about a savings account that pays 2%, but if instead they offered a monthly 1 in 50 chance to get 100% return (same expected value, ignore compounding), people would like that a lot more. But this amounted to essentially a lottery and that's a state monopoly.
by bko
7/30/2026 at 12:03:20 PM
Ireland, like the UK, has a system of Prize Bonds that work exactly like this, administered by the state. The expected return on them is actually quite competitive, depending on your tax situation.Everyone here seems to have got a present of €20 Prize Bonds for a 10th birthday from an aunt or grandmother, yet people from outside are always surprised that such a product can exist.
by dmurray
7/30/2026 at 2:53:41 PM
My return on premium bonds this year (so far) is roughly 3.2% annualised - it's not bad considering that it's tax free, and secured by the governmentby mnahkies
7/30/2026 at 4:08:51 PM
In the US they call those Prize-Linked Savings Accounts. They’re actually legalized in a majority of states but aren’t marketed particularly heavily (especially when compared to lotteries, sportsbooks, prediction markets, …)by lurkshark
7/30/2026 at 3:29:28 PM
What's the difference between a regulatory barrier and a Chesterton's fence?by jancsika
7/30/2026 at 12:42:05 PM
I think that is why Carolina Cloud pays the interest in credits (redeemable for their services), as opposed to cash. It is not much different how some business give you a discount if you pay the amount upfront or in a more convenient form of payment.by mynegation
7/30/2026 at 12:51:35 PM
At scale, a decent number of commercial/business agreements have Net Discount provisions (or provisions to that effect); basically get a % discount if you pay within X days; or pay the full amount with no discount in Y days, so the general arrangement is far from unorthodox.Opening it up to everyone is nice.
by dannyw
7/30/2026 at 12:31:52 PM
In some regulations you can also be expected to declare and pay tax on the money you earned from the interest, which can be annoying to do for such small values.by jwrallie
7/30/2026 at 12:56:44 PM
Definitely annoying, and YMMV, but a lot of jurisdictions don't treat credits (that cannot be redeemed back to cash) as income.In the same way signing up for $App and getting $100 in API credits isn't income; paying a bill early for a 3% discount isn't income; and frequent flyer points or cash back you get on our credit card isn't income.
by dannyw
7/30/2026 at 12:05:41 PM
This is interest on credits, not on cash. Once you start paying interest on cash you need a banking license. I think you'd be fine even in Europe paying interest on credits.by bojangleslover
7/30/2026 at 2:34:39 PM
A "banking license" is typically for "taking deposits or other repayable funds". (There's other kinds of banking licenses, too.) That can be for 0% interest too, or even negative interest (e.g. taking fees into account).by bux93
7/30/2026 at 12:26:18 PM
Why would you think credits and cash would be treated differently? I am not a EU tax expert but it would be shocking if that’s the case because you could create some pretty interesting schemes if by turning cash into a “credit” meant it was treated entirely different.Maybe that’s the case for the EU but it would be surprising.
by infecto
7/30/2026 at 3:07:16 PM
Even with credits or tokens or whatever, it's not completely trivial to find the spot where you can accept customers payments in advance and not be subject to financial regulatory frameworks.by linohh
7/30/2026 at 3:23:05 PM
Absolutely agree. I imagine it almost all scenarios it gets tricky and at the very least puts a good bit of burden on the company to define that with regulatory frameworks.by infecto
7/30/2026 at 12:41:23 PM
Probably because you can't turn credits back into cash.by addandsubtract
7/30/2026 at 12:45:29 PM
Is that a law?by infecto
7/30/2026 at 12:59:40 PM
I'd guess that's a part of the TOS.by kachnuv_ocasek
7/30/2026 at 1:17:54 PM
TOS is not the point.The root of this thread was surprise over rules around interest. I am saying it’s not surprising because companies could then easily create weird schemes.
by infecto
7/30/2026 at 2:21:20 PM
I think you're overcomplicating it.It's "ok" _because_ the credits can't be turned back into cash (thanks to their TOS).
If some business tried some clever scheme where they offer this "interest" on credits that _can_ be turned back into cash, they'd be breaking the law and would need a banking license, it's already covered.
by alias_neo
7/30/2026 at 2:27:15 PM
I think you’re oversimplifying it. “They can’t be redeemed for cash” isn’t a universal legal test. Financial regulation generally looks at the substance of the product. Otherwise every company could sidestep banking and payments rules by calling customer balances “credits.”Now let’s go full circle back to the original point. I don’t think it’s surprising that a company paying interest on credits may face more paperwork and rules for what is truly a gimmick that most large customers will never even care about. Which was my only point and I think the plot has gotten lost as this keeps going deeper.
by infecto
7/30/2026 at 2:35:54 PM
I think there was an original "given" which was that in the US, (where I assume this is), these "credits" don't complicate anything nor create any regulatory burden.That's not to say in the EU, or the UK (where I am) the case isn't different; but if it _were_ the same as the US, I can totally see why that's fine.
We have loyalty programs, a coffee shop gives you "credit" when you get stamps for your 6th coffee free etc, none of that seems to complicate matters... all because of the key point "it can't be turned back into cash".
EDIT: I would add, in the hope of further supporting my argument, that many places that offer loyalty and discount schemes, their ToS explicitly states that it's "not exchangeable" and "has no cash value", which would support my point (at least in the UK).
by alias_neo
7/30/2026 at 2:49:33 PM
You started by telling me I was overcomplicating it, but I think you also missed the context of the thread. The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overhead.My only point from the beginning has been that this isn’t surprising. If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” or have “no cash value,” companies could structure around those rules very easily. That’s why I questioned whether “can’t be redeemed for cash” was actually the legal test.
The loyalty points example is a different product entirely. Even for the linked company I imagine the only reason they do this is a fun marketing angle for winning a finance customer.
by infecto
7/30/2026 at 3:30:10 PM
> The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overheadYes, but I'm not convinced they mean what they're saying, I took that to mean they were trying to do this as _real_ interest.
> If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” or have “no cash value,” companies could structure around those rules very easily
I still stand by my argument, I think it's only "interest" in name; from a banking or financial perspective it isn't. I don't see why it's any different to a company just setting a number in your account. Say I run a SaaS and give you £1000 credit, is that bound by the financial regulations? I don't think so.
If you put a single £10 credit on your balance and I offer to give you "10,000%" "interest" to top it up in credit for my service, I don't think that does either; the wording doesn't suddenly make it covered by financial regulation, it's whether it's _real_ money or not.
Credits on a service, whatever it is, isn't real money, and as long as the ToS doesn't let you turn it into real money, there's nothing complicated to worry about, but if the org _does_ let you turn it into real money, it suddenly becomes covered by financial regulation.
I'm just debating here, I'm not saying I know this to be true, I just think it make sense (to me).
by alias_neo
7/30/2026 at 3:36:14 PM
I think we’re actually debating a narrower point than you think.I agree that simply calling something “interest” doesn’t magically make it a regulated financial product. My disagreement is with the idea that “can’t be redeemed for cash” is the dispositive test. Regulators generally look at the substance of the arrangement, not just the label.
Also, your £1,000 credit example isn’t really analogous to the original post. If you simply gift me £1,000 of service credits, that’s very different from me prepaying £1,000 of my own money and you then paying me a return based on how long that prepaid balance sits with you.
The original discussion wasn’t “are loyalty points regulated?” It was “why would paying a return on prepaid customer balances create more regulatory work in the EU?” To me, the answer “because regulators care about products that start looking financially deposit-like” seems entirely plausible.
by infecto
7/30/2026 at 4:07:56 PM
> because regulators care about products that start looking financially deposit-likeI totally agree with this point, but I don't see how the topic we're discussing would be seen that way.
From a "common sense" point of view (which I know, financial regulation is absolutely not), no matter what you call this act of giving someone extra credit (let's call it "interest") for your service based on the amount they've previously paid for your service (let's call it "deposited"), you're still just giving them monopoly money that serves a single purpose and that is to use more of your service.
If they can't turn it into cash, why should any financial authority care? It's got nothing to do with them.
That said, to take your side for a moment, what's to stop me depositing boat loads of cash up front to pay for your service using the "interest" you'll give me, rather than paying it regularly out of company earnings? Now it starts to sound like something a financial authority might take interest in (pun intended).
by alias_neo
7/30/2026 at 5:29:59 PM
I think your last paragraph is the answer.My only point from the start was that I’m not surprised the EU imposes extra compliance here. Once you’re incentivizing customers to leave prepaid funds with you in exchange for a return, it’s reasonable that regulators would take a closer look.
Whether they ultimately regulate it as deposits, e-money, or something else is for the lawyers. I was never arguing that “credits paying interest” automatically makes you a bank. Simply put it’s not surprising you would have to go through extra hurdles for this kind of gimmick.
I think you are taking this a bit too far. I don’t think it’s shocking that even credits which have a dollar value would need to pass a smell test.
by infecto
7/30/2026 at 9:06:00 PM
> I think you are taking this a bit too farI just find it an interesting thought experiment.
I wonder if this has anything to do with why a lot of companies convert your money into a variety of virtual currencies, "bells", "gold, "gems" etc.
I'll leave it there but nice chatting with you about it!
by alias_neo
7/30/2026 at 3:01:50 PM
Which is a good thing. While it may seem strange to regulate these things for good faith actors, it's obvious why it's a great when thinking about bad faith actors.by linohh
7/30/2026 at 3:04:37 PM
Yes, I love maximally restricting rights of others for unclear reasons.by arcfour
7/30/2026 at 11:47:02 AM
Very interesting I am curious how this is the case, could you share some more details/information about it?Also, how does it compare to say, accepting gold or treating a gold based ledger instead treating gold as a currency and similar ideas?
Also could this re-classification be ever useful too? For examples bonds being treated in such way?
by Imustaskforhelp
7/30/2026 at 12:18:02 PM
It's the case because once you buy cloud credits you are in an entirely unregulated space. At Carolina Cloud, that means your cloud credits are nothing more than an audited and backed up DB entry. Therefore, we can do whatever we want with them. We could double them every 6mo if we wanted. We settled on something more reasonable (SOFR).Not unlike the hyperscalers giving $100k+ to startups and it not counting as income for C-corp tax purposes. Totally unregulated space!
by bojangleslover
7/30/2026 at 12:28:18 PM
What is surprising? Paying interest on cash is effectively a financial instrument. Not sure what gold has to do with it. If you pay a business cash and they turn it into credits that pay interest that would not pass a smell test.No customer would truly care about this and in most jurisdictions you would probably go through a lot more paperwork because of the interest payments.
by infecto