In September 2016 we wrote an article (in Polish) on the relevance of EU law for the FinTech sector. FinTech has seen intensive growth on a global scale in the dozen or so months since then.
The major trends include expansion of EU laws which are crucial for FinTech (work is now being finalised on implementation of directives MiFID II and PSD II into Polish law) or for example completely new market tendencies such as development of blockchain tokens and initial coin offerings (ICO) .
EU institutions are not standing idly by in the face of this growth of the market. In recent days the European Commission and European Banking Authority (EBA) have announced the measures they intend to take.
The Commission’s FinTech plan
In March 2018 the Commission published its “FinTech Action plan”, which proposes measures in light of the growing role of innovation in the financial sector.
This document leaves no doubt that the Commission sees many interconnections between FinTech, as a fragment of the financial sector, and broader digitalisation and new technologies development trends. In legal terms this means that laws on data protection (GDPR), electronic identification, and trust services (eIDAS regulation) or cybersecurity (NIS directive) and not only strictly financial laws, are of crucial importance for FinTech.
The Commission has proposed a series of practical steps to ensure safe development of financial innovation in the EU, and these include:
- EU laws on investment- and lending-based crowdfunding. More information on this subject can be found here.
- A review of the current laws, primarily concerning the existing licencing systems.
- Possibly adopting a regulatory framework for crypto-assets, such as tokens and cryptocurrencies, but the development of the market will continue to be monitored until the end of 2018.
- A series of measures to create FinTech standards, including for Blockchain.
- The Commission assisting with efforts made by member states concerning among other things creation of regulatory sandboxes, such as publication of a report on the best practices in this regard. The Polish Financial Supervision Authority (KNF) is also taking measures (Innovation Hub).
Other envisaged measures include:
- Evaluation of whether there are unreasonable regulatory obstacles to development of financial innovations, in particular relating to applications of blockchain,
- Removing barriers to development of cloud computing services in the financial sector,
- Continuing to support development of blockchain in the EU,
- Creation of an EU FinTech Lab involving member state regulatory authorities,
- Measures regarding security against cyberattacks.
Not long after publication of the Commission’s plan, the EBA also presented a plan reached following the 2017 market consultations. This plan describes the measures that the institution will take. It is plain that the roles of the EBA, European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA) will gradually increase with regard to FinTech.
The role of EU law and EU institutions’ policy in the FinTech sector will certainly grow, partly in response to market expectations, as more and more products and services are directed towards the global user. At the same time, certain new trends on the market, such as decentralised financial services, will raise questions about the existing forms of regulation and their effectiveness. The level of activity of European lawmakers is unlikely to wane in the near future – the FinTech sector should expect further legislation and measures, including those described in the Commission’s plan.