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Stored value cards are financial instruments that allow individuals to store a monetary value for future transactions. In financial regulations, these cards are primarily categorized into two types: open systems and closed systems.

Open systems refer to stored value cards that can be used at multiple merchant locations and allow for funds to be loaded and reloaded. These cards are often interchangeable with credit or debit cards, enabling users to make purchases at various participating retailers or online platforms. The flexibility of open systems makes them popular for everyday transactions.

Closed systems, on the other hand, are limited to a specific merchant or group of merchants. These cards usually cannot be redeemed for cash or used outside of the issuer’s network. They might come in the form of gift cards, which can only be used at a particular store or chain, making them less versatile than open systems.

Understanding these classifications is crucial for compliance with regulations surrounding the issuance and use of stored value cards, which help in preventing money laundering and financial crimes. Other options, while they may describe various financial concepts, do not accurately reflect the recognized categories of stored value cards in financial regulations.