Financial Services

Doubling Down on Digital: EU Sets Course for Digital Finance and Payments

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An overview from FTI Consulting Brussels

The European Commission has proposed a comprehensive new digital finance and retail payments strategy. This is a blueprint for the future of digital finance in the EU, and an unprecedented expansion of financial services regulation over technology. FTI Consulting Brussels explains how it could affect Europe’s global role in digital finance.

The European Commission’s Digital Finance Package comprises far-reaching strategies for retail payments and Digital Finance. It also includes an additional three proposals on operational resilience, crypto-assets, and the use of distributed ledger technology (DLT) in capital markets.

At a time when digital lies at the heart of the European Union agenda, the Commission’s proposals bring financial services firmly within that ambition. What has been presented is an outline of the future of Digital Finance in the EU, and a blueprint that could be exported globally – yet another illustration of the ‘Brussels Effect’.

The package covers all aspects of Digital Finance:

  • Data and infrastructure: review of rules for instant payments, open finance, and cross-border digital identity.
  • Operations and risk: comprehensive cybersecurity requirements for all types of financial service players and their providers, and a move towards automated regulatory reporting.
  • New technologies: an EU ‘sandbox’ for the use of blockchain in market infrastructure.
  • New markets: all crypto tokens covered by legislation and certifying RegTech solutions.

With its Digital Finance Strategy, the Commission wants to harmonise the cross-border offering of all digital financial services in the EU and ensure that legislation is fit for purpose.

The Commission doesn’t want to hang around: the EU institutions (European Parliament and Council) are due to kick off negotiations shortly.

While the aspiration might be for rapid agreement, it may not all be smooth sailing. These are highly political issues which also reverberate globally. Digital Financial Services is not only a priority due to its impact on economies, digital inclusion and access to the EU market by new, non-EU players, but it  touches wider EU conversations such as the green agenda, and crucially the debate on digital sovereignty in Europe. As our colleagues recently wrote, connectivity itself is (geo)politicised.

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