On the 24th September 2020, the European Commission (“EC”) issued its digital finance package consisting of a digital finance strategy and regulatory suggestions on crypto-assets and digital resilience in order to push for a competitive EU financial market that grants consumers the opportunity to have innovative financial products, while assuring consumer protection and market stability.
A Digital Finance Strategy
The Digital Finance Strategy proposed by the EC establishes how the financial sector will be transformed digitally within the European market. In this regard, the EC’s strategy focuses on the following four main factors:
- Removing fragmentation in the ‘Digital Single Market’;
- Adopting an EU regulatory framework to facilitate digital innovation;
- Promoting data-driven finance by improving data sharing within the financial sector; and
- Addressing the challenges and risks forthcoming with the digital evolution.
The EC believes that by embracing digital finance, the European market will be able to thrive through various innovations while enabling opportunities for the development of better financial products for consumers.
Currently, the EC plans to introduce its strategy on supervisory data in 2021, while the legislative proposal for a new open finance framework would be introduced by mid-2022. These changes would include proposals for legislative changes enhancing consumer protection within the EU.
A Retail Payments Strategy
The Retail Payments Strategy proposed by the EC envisages safe, fast and reliable payment services to European consumers and businesses. Moreover, the strategy also seeks to attain a fully integrated payments system in the EU providing for instant cross-border payment services, which will also ease euro payments with non-EU countries. By the end of 2021, the EC also plans to decide whether it would be appropriate to introduce legislation requiring payment service providers to be compliant with the SEPA Instant Credit Transfer Scheme.
The EC will also be working in tandem with the European Central Bank in its vision for the possible issuance of a retail Central Bank Digital Currency. In supporting the European Central Bank in this matter, the EC will seek to ensure cooperation between the private and public sectors.
Legislative proposals on crypto-assets
A comprehensive regulatory framework is being proposed by the EC for the regulation of markets in crypto-assets to enable innovations within the financial sector while maintaining financial stability and provide the required protection to consumers.
The proposed framework will not only cover the issuance of crypto-assets but also all relevant entities providing services related to crypto-assets. Additionally, the regulatory framework will seek to provide a definition for emerging crypto-assets typically referred to as ‘stablecoins’ whereby these will be envisaged as e-money tokens and asset-referenced tokens.
The EC plans to also introduce a pilot regime for market infrastructures that initiate and execute transactions through distributed ledger technology (“DLT”). The regime will take the form of a ‘sandbox’ allowing for DLT solutions to be developed and operate in a controlled environment enabling the developers to experiment in a safe environment.
Legislative proposals on digital operational resilience
Adopting the recommendations set in the 2019 Joint technical advice of the European Supervisory Authorities that called for increased coherence within the approach taken to address ICT risk in finance, the EC proposes that all participants within the financial sector have the necessary safeguards implemented to mitigate cyber-attacks and other ICT risk-factors.
Feel free to contact us should you require any further assistance on the Digital Finance Package envisaged by the EC.