On 8 March 2018, the European Commission (“Commission“) published its FinTech Action Plan for a more competitive and innovative European financial sector. In it the Commission outlines the important synergies with the Commission’s Digital Single Market Strategy and the wider Capital Markets Union (“CMU“) efforts led by its president, Jean-Claude Juncker.
The Comission’s FinTech Action Plan sets out three core objectives:
- Enabling innovative business models to reach EU scale;
- Supporting the uptake of technological innovation in the financial sector; and
- Enhancing security and integrity of the EU financial system.
The Plan is focused on striking the balance between allowing innovation to flourish, which the Commission highlights is important for the CMU and is a priority area on a global level, with regulatory measures that “embrace digitalization without compromising financial stability or consumer and investor protection“.
In order to enable innovative businesses to scale-up, there is a need for clear and consistent regulatory and licensing application and requirements. The Commission calls on the European Supervisory Authorities (“ESAs“) in the Plan to map current authorisation and licensing approaches for FinTech business models with a view to developing uniform operating conditions allowing businesses to reach consumers across the European Union. In its Plan, the Commission wants to encourage the development of common standards and interoperable solutions, including the development of standardised PSD2 and GDPR compliant Application Programming Interfaces (APIs) in order to support a European open banking eco-system.
Encouragingly, the Plan also recognizes the increasing importance in assessing market developments in crypto-assets and initial coin offerings as means of raising funds. The Commission’s plans are initially to continue to allow for innovation by restricting implementation of new regulatory requirements and plans to monitor developments with ESAs. It also calls on the coordination of international financial standard setters (such as the European Committee for Standardisation, the Financial Stability Board and the International Organization for Standardisation) to help develop clear and consistent standards, including in the blockchain area.
In its Plan, the Commission notes that 13 Member States have established innovation hubs or regulatory sandboxes which are seen to be driving innovation forward by encouraging FinTech businesses to test ideas within the regulated space, however, the application of these and extent of their mandate has not been consistent. The Commission will present a report on best practices for regulatory sandboxes by Q1 2019. It plans to also set up an expert group to assess by Q2 2019 whether there are unjustified regulatory obstacles to financial innovation.
In the cloud services sector, the Commission invites cloud stakeholders to develop cross-sector self-regulatory codes of conduct and best practice to facilitate use and comparability for consumers.
Lastly, the Plan highlights the European Parliament’s instruction to the Commission to “make cybersecurity the number one priority in the FinTech action plan“. The Commission aims to address this by organizing a public-private workshop in Q2 2018 to asses barriers limiting information sharing on cyber threats between financial market participants, calls on the ESAs to evaluate by Q4 2018 costs and benefits to developing coherent cyber resilience testing framework and map, by Q1 2019, existing supervisory practices across financial sectors around cyber security and if necessary provide the Commission with technical advice on need for legislative improvements.
Alongside the Action Plan, the Commission has published a proposal for an EU Crowdfunding Regulation. This would introduce an optional EU regime, to enable crowdfunding platforms to provide their services both at home and in other EU Member States according to a single set of rules.
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