At the beginning of March, the European Commission presented its action plan on financial technologies (‘FinTech’). According to the draft text, which was consulted by EUROPE on Tuesday 6 February, the Commission is not planning a revolution in this area, but to make steady progress.
“The Commission considers that the case for broad legislative or regulatory action or reform at EU level at this stage is limited”, it states in the document, lining up instead in favour of more targeted non-legislative initiatives over the next two years.
Crowdfunding. The only legislative proposal, which is to be presented alongside the action plan, concerns the creation of a European legal framework for crowdfunding platforms based on investment or loans in order to ensure that these services are subject to proportionate regulatory requirements.
According to the draft regulation, of which EUROPE has had sight, the scope of application will cover all crowdfunding service providers and will establish standard requirements concerning the provision of crowdfunding services for businesses wishing to provide their services throughout the EU.
This will mean that a crowdfunding services provider will be able to choose to: - continue to provide services on a national basis in line with the national legislation, or: - apply for a licence from the European Securities Markets Authority (ESMA) to provide crowdfunding services throughout the EU through a European passport (‘passporting).
ESMA will also be given powers to withdraw licences in the event of breaches of the European rules or if the service provider no longer meets the conditions.
Virtual currencies. As regards virtual currencies, the European Commission is remaining cautious. Although it reiterates the many warnings of the European financial supervisory authorities (ESAs) (see EUROPE 11903) and acknowledges that the “rapid increase in price and volatility of cryptocurrencies over the past months requires a better understanding of the risks and opportunities related to their use, as well as of the applicability of EU regulation”, it includes no concrete measures in its action plan at this stage.
However, it states that it will continue to monitor these developments closely and will carry out regular exchanges with the supervisory authorities, the regulatory authorities and the industry to assess any other action necessary (see EUROPE 11952).
Cyber-security. In its draft action plan, the Commission also lays emphasis on cyber-security, stating that it will seek to identify potential solutions to overcome obstacles to the sharing of information on cyber-threats between market participants, in the second half of 2018.
In particular, it has asked the ESAs to submit a technical opinion, in the first quarter of 2019, on the need to tighten up European legislation and assess the costs and advantages of putting together a coherent framework of cyber-threat tests for the principal market players across the EU financial sector in 2018.
The convergence of requirements concerning the issuance of licences for FinTech companies, removing obstacles to the use of ‘cloud’ services and the interoperability of technologies are also on the Commission’s agenda.
Amongst other things, the European institution will present recommendations at the end of 2018 on ‘sandboxing’, the use of information security mechanisms to help reduce risks, for operating systems when software is put into use and to create an expert group to examine whether the current regulatory framework will match up with the use of distributed ledger technologies and artificial intelligence in 2019.
FinTech Lab. In 2018, the Commission also plans to create a ‘FinTech Lab’ where the ESAs and the national authorities will be able to work with providers of technological solutions in a neutral, non-commercial space.
The Commission document concludes by saying that “this action plan combines both supportive measures to ease the uptake of FinTech solutions, and proactive measures designed to foster and stimulate new solutions, or address risks that emerge”. (Original version in French by Marion Fontana)