On Thursday 8 March, the European Commission unveiled an action plan comprising 23 non-legislative initiatives aiming to make the most of the possibilities offered by technological innovations in the field of financial services (FinTech).
After two years of work on the subject, the Commission has reached the conclusion that the need for global regulatory action at EU level is still limited. Its approach caused a degree of disappointment among certain stakeholders, such as the European Banking Federation, which was hoping for a higher degree of ambition to move away from the “current patchwork of different regulatory approaches across the EU”.
The major aims of the final action plan have not changed from the draft text distributed to the press in early February (see EUROPE 11955), namely: - setting in place a European FinTech laboratory bringing together European authorities and providers of technological solutions in the second half of 2018; - a global strategy for distributed ledger technology, covering all sectors of the economy, with the first pilot projects this year; - an assessment by the European supervisory authorities of the costs and benefits of establishing a European framework for cyber-stress tests at the end of 2018; - an action plan listing best practice on regulatory sandboxes by the first quarter of 2019.
On virtual currencies, nothing new. The action plan simply confirms what the Commissioner for Financial Services, Valdis Dombrovskis, said on 26 February (see EUROPE 11969) – that the Commission was not ruling out the possibility of specific initiatives, but that at this stage, it was an international response that was taking shape instead.
The Commission also announced the creation of an expert group responsible to consider whether the current EU rules on financial services are appropriate for the challenges related to new technologies. This group will report in the second quarter of 2019.
A European passport for crowdfunding platforms
On the same day, in the first solid achievement of its action plan, the Commission presented a proposed regulation establishing a European passport that will allow crowdfunding platforms apply to provide their services throughout Europe, following the prior authorisation of the European Securities and Markets Authority (ESMA).
“An EU crowdfunding licence would help crowdfunding platforms scale up in Europe”, Commissioner Dombrovskis told a press conference. In this area, the EU is in fact way behind its international partners. Over the period 2017-2018, when crowdfunding in the United States represented €35 billion, it stood at just €7 billion in Europe.
The final proposal keeps in place the exclusion for crowdfunding campaigns of a total in excess of €1 million over a period of 12 months - a provision that is not to the liking of the European Crowdfunding Network. Its executive director, Oliver Gajda, said that the measure could be counter-productive, as it would encourage many platforms to stay outside the European system, in order to avoid cross-border financing (see EUROPE 11976).
In its proposal, the Commission also brought in a number of investor protection mechanisms. Before being allowed to invest, investors would first have to pass a knowledge test to assess their understanding of financial products. Furthermore, service providers will no longer be authorised to accept commission to encourage clients’ interest in certain projects.
Despite these extra protections, consumer rights defence organisations consider that the proposal’s promises are empty. The European Consumer Organisation (BEUC) says that the Commission has missed an opportunity to step up protection for consumers, particularly due to the voluntary nature of the proposed European accreditation system.
It argues that platforms operating at national level alone will be disinclined to pursue accreditation, unless they were hoping to evade a stricter national regime.
“These rules have been set up to help crowdfunding platforms, not consumers”, says its director, Monique Goyens.
The action plan is available at: http://bit.ly/2DcalQZ. (Original version in French by Marion Fontana)