The European Commission has adopted a new digital finance package, containing – for the first time – legislative proposals on crypto-assets and digital operational resilience.
The package – which includes, also for the first time, a retail payments strategy for the 27-member European Union (EU) – is introduced after consultations that launched in the spring.
The simultaneously unveiled measures are designed ultimately to boost Europe’s competitiveness and innovation in the financial sector, “paving the way for Europe to become a global standard-setter”, the Commission said. It intends to give citizens more choice and opportunities in financial services and “modern payments”, while ensuring consumer protection and financial stability.
Its measures, the Commission said, will be “crucial” in supporting the EU’s economic recovery as it will unlock new ways of channelling funding to businesses, while also helping to deliver the European Green Deal and New Industrial Strategy for Europe. It wants to boost “responsible innovation” in the EU’s financial sector, while mitigating potential risks related to investor protection, money laundering and cyber-crime.
‘Technology has much more to offer’
“The future of finance is digital,” said the Commission’s executive vice-president for an economy that works for people, Valdis Dombrovskis, presenting the plans via video-link. “We saw during the lockdown how people were able to get access to financial services thanks to digital technologies such as online banking and fintech solutions. Technology has much more to offer consumers and businesses and we should embrace the digital transformation proactively, while mitigating any potential risks.”
Aims include facilitating EU member states’ citizens’ access to financial products across borders; doing more to help fintech start-ups to scale up; and aiming to ensure a ‘level playing-field’ between all firms – including technology companies, which are increasingly moving into finance – providing financial services.
The retail payments strategy, meanwhile, aims achieve a fully integrated retail payments system in the EU, including instant cross-border payments.
Regulatory framework proposed for crypto
The Commission has also proposed legislation on ‘crypto-assets’. The ‘Regulation on Markets in Crypto Assets’ (what it has dubbed ‘MiCA’) would, it says, provide legal clarity and certainty for crypto-asset issuers and providers. The new rules will allow operators authorised in one member state to provide their services across the EU (known as ‘passporting’).
The Commission says that the EU should put in place a comprehensive framework ‘enabling the uptake of distributed ledger technology (DLT) and crypto-assets’ in the financial sector by 2024, and that it should also ‘address the risks associated with these technologies’.
Issuers of significant asset-backed crypto-assets – global so-called ‘stablecoins’ – would be subject to more stringent requirements.
The Commission also proposes a ‘sandbox’ pilot regime for companies developing infrastructure for the trading and settlement of digital assets.
A ‘Digital Operational Resilience Act’ (‘DORA’) has also been proposed as the EU looks to ensure that all financial system participants have safeguards to mitigate cyber-attacks and other similar risks. The proposed legislation also introduces an oversight framework for ICT providers, such as cloud computing service providers.
In the arena of retail payments, the EU’s Payment Services Directive 2 (PSD2) was already a significant step, paving the way for initiatives such as open banking. PSD2 will be reviewed in Q4 2021, “and adjusted where necessary, in order to support the implementation of the retail payments strategy policies”, the Commission said.
Presentation of the digital finance plans – which were set out alongside an ‘action plan’ to boost the EU’s goal of Capital Markets Union (CMU) – is likely to be one of Dombrovskis’s most significant final tasks in his current role as he is shortly due to take up the Commission’s trade portfolio. Ireland’s Mairead McGuinness, a European Parliament vice-president, is lined up to replace the Latvian.