Europe now has an action plan for fintech

The European Commission believes European financial markets “will be more integrated, safer, and easier to access” thanks to this blueprint. According to the organization, the plan will “help the financial industry make use of rapid advances in new technologies, such as blockchain” and other technological applications and strengthen cybersecurity to the benefit of consumers, investors, banks and new market players alike.

European Commission: The plan will “help the financial industry make use of rapid advances in new technologies, such as blockchain” and other technological applications and strengthen cybersecurity

The action plan is part of the EU’s efforts to harmonize Europe’s financial and technical markets. As such it follows two previous initiatives: the Capital Markets Union and the Digital Single Market. The following are some of the points included in the Commission's plan.

• Establish an EU-based fintech laboratory to raise knowledge about new technologies among regulators and supervisors.
• Examine the best way to promote the digitization of information about publicly listed European companies, including the use of innovative technologies to connect national databases.
• Conduct workshops to improve the exchange of cybersecurity information.
• Present a report with best practices for regulatory sandboxes.
• Provide information on 2018's challenges and opportunities related to crypto-assets under the framework of the EU's Blockchain Observatory and Forum, which was launched in February of this year. The Commission is also working on a holistic strategy addressing distributed ledger technologies (DLT or “blockchain”) to cover all sectors of the economy.

In many of these activities the European Commission will work joint with regulatory authorities and banking supervisors with the European Banking Authority (EBA) leading the way.

European focus on crowdfunding

The plan contains a proposal to regulate crowdfunding. The European Commission wants to bolster a sector that according to data from the Cambridge Center for Alternative Finance (CCAF), is still underdeveloped in Europe. According to CCAF's data, in 2016 European crowdfunding moved 7.7 billion euros a year, as opposed to 35.2 billion in North America and 201 billion in Asia Pacific.

The Commission believes ‘crowdfunding’ can complement traditional systems of financing for new businesses. To do so, among other measures, they propose granting “European crowdfunding passports” for those companies that want to provide these services. The EC introduces the idea of an optional, pan-European system in which a crowdfunding platform that wants to operate in more than one member country can obtain a European-wide “passport” after receiving authorization from the European Securities and Markets Authority (ESMA).

Additionally, the EC maintains that investors in crowdfunding platforms operating under this “European passport” will be protected by clear rules of governance, risk management, and a coherent approach to supervision.

The Spanish Banking Association (AEB) calls for greater flexibility

The AEB considers some of these proposals to be very positive and ambitious, but “others delay the rolling out of concrete measures given the dependence on a need for greater understanding of the impact of the new technologies and the activities associated with innovative technologies.”

“The Commission’s approach, which is cautious and justified in some areas, could stall the adoption and consequent benefits of new technologies in the European financial services market, posing disincentives to its integration and weakening its position on the world stage.” the AEB asserts.

Spanish Banking Association: The Commission’s approach, which is cautious and justified in some areas, could stall the adoption and consequent benefits of new technologies in the European financial services market

On the other hand, the AEB welcomes the EC's intentions to “eliminate obstacles to using cloud-based technologies and facilitating the use of artificial intelligence and blockchain, recognizing the needs of the financial sector.” It also supports the initiative to establish regulatory sandboxes in member countries to identify best practices although it believes “a more ambitious endeavor by the Commission would generate greater benefits for the European market.”

The AEB supports “the examination of different existing authorization and licensing regimes on the national level with the aim that a review of the regulatory scope of fintech activity will avoid the creation of an uneven playing field between competitors.”