On 26 June, the European Commission consultation on a new digital finance strategy for Europe closed. The Commission’s preparations for its new strategy provide for a good opportunity to take stock of what we have learned so far about potential next steps.
On 3 April 2020, the European Commission had published its consultation on the new strategy, and organised a digital outreach of over 30 events, including thematic events and national events. Last week the European Commission organised an (online) conference to close the consultation process.
During this event, the European Commission vice-president Dombrovskis presented the key themes the European Commission will be focusing on:
- Single market for digital financial services (to allow scale up), removing barriers and using digital identities as a tool.
- Open finance, including data-driven financial sector. There the PSD2 model is often quoted to allow third-party service providers to access systems. According to the Commission, financial institutions must overhaul their legacy IT systems to make them fit for the future being more flexible and open to working with FinTech companies.
- Innovation, supporting it and ensuring legislation is technology-neutral.
The European Commission intends to present its action plan in September 2020. A few draft legislations are already being prepared.
Crypto-assets and distributed ledger technology will be the first test case and the European Commission will propose a draft legislation by the end of the year. As distributed ledger technology constantly evolves, the Commission will propose a framework allowing regulatory flexibility and under close supervisory oversight. The Commission also intends to create a bespoke regime and passport for assets which are not covered by any legislation so far. Approaches will be adapted to the level of risk to ensure financial stability, for instance for stablecoins, a distinction will be made between “global stablecoins” and smaller ones.
In autumn, the European Commission intends to present a proposal on operational resilience for all financial institutions to follow. This way the European Commission intends to address the systemic risks linked to cyber risk.
As part of the proposed regulation, the European Commission intends to create a financial oversight mechanism for third-party ICT providers (like cloud services), and rules to deal with concentration risks that come from relying on a handful of outside providers.
Finally, it is important to note that current scandals and international negotiations are likely to have an impact on some policy options the European Commission is likely to pursue. The WireCard scandal is likely to have an impact on certain policy aspects. Indeed the German presidency of the Council is keen to discuss the supervision of providers of critical payments infrastructures and auditors. Another key political discussion is likely to be the taxation of digital players.
Discussions are therefore expected to remain very interesting. It will be worth keeping an eye on the news from Brussels space in the months to come.
By Aurélie Cassou