The European Commission is due to present, on Wednesday 23 September, its strategy on digital finance, which will guide its actions until 2024 to “embrace digital finance for the good of consumers and businesses”.
The draft text - which is still subject to change and of which EUROPE received a copy on Thursday 17 September - takes the form of a communication setting out four main priorities. The strategy will be accompanied by a legislative proposal on crypto-assets (see EUROPE 12559/20) and on the digital operational resilience of the financial sector as well as a separate strategy for retail payments.
A broad passporting regime
The Commission’s first priority is to tackle the fragmentation of the digital single market for financial services. Thus, according to the draft text, it aims to generalise by 2024 the principle of passporting and a one-stop shop licensing “in all areas which hold strong potential for digital finance”.
In addition to the passporting system for issuers of crypto-assets, which should be included in the legislative proposal accompanying the Communication, the Commission undertakes to examine the relevance of the passporting in other areas, such as non-bank loans.
Another action envisaged is to enable, by 2024, the use of interoperable digital identity solutions that will enable new customers to access financial services quickly and easily (‘on-boarding’). To this end, the Commission should propose in 2021 a revision of the e-IDAS Regulation on electronic identification and trusted services for electronic transactions in the single market (e-IDAS Regulation).
It also envisages the establishment of a European platform on digital finance to foster cooperation between private and public stakeholders, which will be designed to be eligible for funding under the Digital Europe programme, the document says.
Use of new technologies
The Commission wants to facilitate innovation, while tackling the risks of new technologies. By 2024, it commits to establishing a global framework for the use of Distributed Ledger Technology (DLT), according to the draft text.
It also wants to clarify supervisory expectations as to how the financial services legislative framework should apply to artificial intelligence (AI) applications. In addition, the European Financial Supervisory Authorities (ESAs) and the European Central Bank (ECB) should be invited to explore the possibility of developing regulatory and supervisory guidance on the use of AI applications in the financial sector in 2021.
It is also expected to propose legislation on a framework for open finance in mid-2022. “A balanced regulatory framework for the sharing of data on financial products will support the financial sector in fully embracing data-driven finance, and effectively protect data subjects, who must have full control over their data”, the draft text states.
It should be noted that the Commission also wants to promote investment in software, by adapting the prudential rules on intangible assets.
In general, the Commission promises to ensure, through regular legislative reviews and interpretative guidance, that the EU regulatory framework for financial services will not prescribe or prevent the use of particular technologies. The first interpretative communication, to be issued in 2021, will provide further clarification on the treatment of crypto-assets, the document says.
A European Financial Data Area
Another proposal included in the draft text is the creation of a European Financial Data Area to promote data-driven innovation in the financial sector. A group of experts should be set up to provide advice on the technical aspects of its establishment.
In addition, the Commission wants all information that must be made public under EU financial services legislation to be disclosed in standardised machine-readable electronic formats by 2024. In this regard, it would also consider developing, in collaboration with the ESAs, a strategy on monitoring data in 2021.
Same risks, same rules
The draft text underlines that, as part of its strategy, the Commission will pay particular attention to the principle of “same risks, same rules”.
After careful consideration, the Commission should propose, by mid-2022, adjustments to the existing financial services legislative framework with regard to consumer protection and prudential rules, in order to safeguard financial stability and ensure a level playing field.
See draft text: https://bit.ly/2FIbW8i (Original version in French by Marion Fontana)