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Fintech under increasing scrutiny in push towards achieving EU ‘technological sovereignty’

“Technological sovereignty” is the buzzword of the incoming European College of Commissioners, where Fintech looks set to be the subject of increasing regulatory scrutiny. The Commission is planning to set up a Fintech unit in early 2020 within the Commission’s department for financial services, known as DG FISMA.

German Commission official, Jan Ceyssens, is expected to head the new unit which will be responsible for drawing up rules on cyber security and crypto assets, as well as preparing the EU to address any issues that arise as tech companies increasingly move into the financial sector. This development comes at a time when plans for the Facebook-backed virtual currency, Libra, appear to have spooked regulators on both sides of the Atlantic.

Within the College of Commissioners, the person overseeing DG FISMA and the Fintech sector will be the Christian-democratic politician and former Prime Minister of Latvia, Valdis Dombrovskis, who is due to have the rather grand title of “Executive Vice President for an Economy that Works for People.” Dombrovskis is currently in charge of the Euro and Social Dialogue in the outgoing Commission, but will now have an expanded portfolio.

Along with having responsibility for completing the Banking Union and speeding up work towards a Capital Markets Union, Dombrovskis has been called to:

  • Put forward a Fintech strategy to support new digital technology in our financial system;
  • Ensure a common approach of Member States on cryptocurrencies to ensure we understand how to make the most of opportunities they create and address the new risks that they pose;
  • Put forward a new, comprehensive approach to fighting money laundering and the financing of terrorist activities; and
  • Develop a green financing strategy to direct investment and financing to support transition to a climate-neutral economy.

When he was grilled by MEPs during his Hearing as the European Parliament last month, Dombrovskis declared an ambition for Europe to be a global standard-setter in the area of new technology and finance. He cited instant payments as an example of how Fintech can give consumers better and faster access to finance. “I will put forward a new strategy for Europe to get the best out of FinTech and to compete globally,” said Dombrovskis.

In a smooth performance, Dombrovskis spoke about the need to address risks such as unfair competition, cybersecurity, and threats to financial stability. By way of illustration he added: “Europe needs a common approach on crypto-assets, such as Libra. I intend to propose new legislation on this.”

Specifically, the Latvian politician suggested that there was a need to keep a watchful eye on Libra. He stated: “We’ll need to regulate Libra to supervise it on EU level both from the point of financial stability and the protection of investors as well.” He also suggested that this may require a new “regulatory framework” for virtual currency, specifically stablecoins linked to conventional currencies.

Meanwhile, the EU’s “technological sovereignty” was also a theme during the Hearing on 14 November of the incoming Internal Market Commissioner and former CEO of French tech company Atos, Thierry Breton. Breton argued that the EU must invest more in the future of digital so that the region is not over-reliant on the tech expertise of foreign companies, especially in strategic sectors of the economy including artificial intelligence, cybersecurity and blockchain.

Following delays caused by rejected candidates, the new Commission is due to begin its work on 1 December 2019, but further delays cannot be ruled out. The eventual start date is dependent on the European Parliament voting on 27 November to approve the final line-up of Commissioner-candidates. It also hinges on finding a legal workaround to the current situation where the UK has declined to put forward a candidate ahead of its general election on 12 December.

For further information please contact:

Francine Cunningham
Senior Public Affairs Manager, Bird & Bird (Brussels)

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