Objectives of the EU´s digital finance strategy
The EU is Tackling fragmentation in the Digital Single Market. Adjustments are needed to ensure the legal framework and interoperability of digital identity solutions. The EU regulatory framework shall facilitate digital innovation in the interest of consumers and market efficiency. Given developments in technology, the Commission has taken a pro-active approach and proposed adjustments to the EU’s financial services legislation and supervisory practices to ensure that they remain relevant in the digital age. Creating a European financial data space to promote data-driven innovation, building on the European Data Strategy. Enhanced access to data and data sharing within the financial sector will encourage the financial industry to embrace data-driven innovation and lead to more innovative products for consumers and businesses.
Compliance with data protection rules, in particular, the General Data Protection Regulation, is a pre-requisite for a global player and a financial sector driven by data. The principle of the digital finance package is Same Risks – Same Rules – Same Regulation!
Crypto exchanges and custodial wallet providers must have a physical presence in the EU and become subject to prior authorization from a competent national authority before starting their activities. They will be subject to capital requirements, governance standards, and an obligation to segregate their clients’ assets from their assets. These crypto-asset service providers will also be subject to IT requirements to avoid the risks of cyber thefts and hacks. Supervision will, in principle, fall upon the authorities of the Member State where providers are based. If the control is divided between several competent authorities because activities are cross-border, it will be up to the Member States to designate a single point of contact. European Banking Authority will supervise asset-referenced tokens because these instruments are likely to pose significant risks for financial stability and consumer protection in multiple member states.
Local law itself is never a problem, as long as it offers international parties the opportunity to join the local market under level playing-field conditions – meaning a situation in which everyone has the same advantages and disadvantages. A level playing field is vital for Europe in the global environment of “America First” and China’s unstoppable rise.
Crypto-assets and their underlying technology present considerable opportunities but are also associated with significant risks, stemming mainly from the fact that most of them have remained so far unregulated, which exposed digital businesses to scammers and hackers. A digital euro could evolve as a safe form of money and avoid possible undesirable implications for fulfilling its mandate for the financial industry and the broader economy.
The EU´s initiative creates opportunity in the EU Market, something we (Axel Hoehnke) were looking for when working with global adtech leaders like Smaato. Have a look at our Strategy Consulting Services and our seamless onboarding process.