Europe Unveils Fintech Action Plan

The action plan was published on March 8 by the European Commission (EC). It contains 23 different steps designed to cover a broad swath of the nascent fintech sector, from the development and promotion of blockchain technology through to information sharing in cybersecurity and aligning standards between member states.

In addition to the fintech action plan, the EC also released proposals regarding crowdfunding—for which EU-wide “passports” were suggested—and sustainable finance.

“To compete globally, Europe’s innovators need access to capital, space to experiment, and scale to grow,” said Valdis Dombrovskis, vice president of the EC, in a press briefing held on March 8 in Brussels. “But we also need to address consumer safety, and maintain the resilience of our financial institutions to cyber-attacks.”

Under some of the key proposals, the EC will establish an “expert group” to assess the body of regulation that currently covers financial services within the bloc, and whether those rules are sufficiently adaptable to handle the challenges posed by fintech. A report from the group will be due in the second quarter of 2019.

The EC will also establish a non-commercial laboratory designed to educate regulators on current developments in fintech. The lab, which will hold sessions four times per year, will focus its first workshop on cloud computing and outsourcing.

Thirdly, the EC proposes empowering the European Supervisory Authorities (ESAs) to identify best practices among national regulators when it comes to the concept of sandboxes. These are environments designed to allow firms to test their software before hitting the live market, overseen by national regulators. The UK’s Financial Conduct Authority (FCA), for instance, was one of the first to promote the sandbox concept, which has since been used as a template for many others.

The last major initiative covers blockchain, and the establishment of the European Financial Transparency Gateway. This system, which uses a blockchain technology foundation to link national databases, is designed to allow for easier sharing of information across borders on listed companies. A specialist group of experts, the European Blockchain Observatory and Forum, has already been launched and is in its inception phase. It will track the development of the technology and make recommendations for action at a European Union level where appropriate.

The action plan was generally well-received among market participants, although some urged the EC to tighten its timelines for action. The Association for Financial Markets in Europe, for instance, urged the EC to establish its expert group sooner than 2019, given “the significant developments in distributed-ledger technology (DLT) and artificial intelligence already taking place.”

The action plan forms part of the wider Capital Markets Union project under way in Europe, which aims to break down national obstacles to interstate commerce within the bloc, such as tax laws and restrictions on capital movement, to encourage wider participation in equity markets across the Union.

“Today the Commission revealed the latest chapter in its Capital Markets Union Action Plan, which is the most ambitious one so far,” says Simon Lewis, CEO of Afme. “Amid significant political change, the case for a CMU is more compelling than ever. For the project to succeed, the CMU must be focused on building EU capital markets in a global marketplace, ensuring that EU markets provide capital to enable businesses to grow.”