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Regulation of FinTech must strike a better balance between market stimulation and the security and stability of the financial and economic system

Financial technology

The EESC believes that the European Commission's Action Plan is a good basis but that additional measures are needed to tap the full potential of financial technology and to ensure certainty and protection for all market participants

The measures proposed by the European Commission concerning the development of financial technology (FinTech) within the European financial sector must be adjusted so as to balance market stimulation and the security and stability of the financial and economic system. The overall aim must be to ensure certainty and protection as well as fair and equal market conditions for all market participants. The EESC is strongly convinced that FinTech, in an appropriate legal framework, can deliver benefits to European businesses and their clients, contributing to a more competitive and innovative European financial sector.    

"FinTech players should be subject to the same rules as the financial sector, particularly as regards resilience, cyber security and supervision", said Petru Sorin Dandea, rapporteur for the EESC opinion on the proposals of the so-called FinTech Action Plan. "We must follow the principle of 'same risk, same rules, same supervision'", he said. In addition, the Committee is calling for rules to ensure uniform development of FinTech in the EU.

Despite its reservations, the EESC supports the Commission's action plan. It believes that the plan could be instrumental as regards deepening and broadening the capital markets by integrating digitisation, and that it could serve as a stimulus for small and medium-sized enterprises active in the financial sector, as it can facilitate their access to finance. The action plan could thus contribute to the completion of the capital markets union, Economic and Monetary Union and the Digital Single Market, priorities that are strongly championed by the EESC.

Concerning the right to portability of personal data, the EESC believes that this must be implemented in a manner that is compatible with the new Payment Services Directive (PSD2). This would ensure that a level playing field is achieved as regards access to customer data under PSD2 and the General Data Protection Regulation (GDPR).

The EESC would point out the need to clarify the responsibility of companies offering cloud services as regards protecting the personal data they host. Possible rules should be identified by the Commission.

Further recommendations expressed in the Committee's opinion concern crypto-assets and the impact of innovative technologies on the labour market in the financial sector. The EESC recommends that the European Commission together with the European supervisory authorities keeps a close eye on the growth and the high degree of volatility of crypto-assets and addresses any issue concerning this matter that could threaten the security and stability of the financial and economic system. As regards the impact on the labour market, the Committee calls on the Member States to design and implement active labour market measures enabling workers who lose their jobs to take up new jobs.

In line with its opinion on the FinTech Action Plan, the EESC strongly welcomes the Commission's proposals for an enabling framework for crowdfunding. It believes that artificial obstacles should not act as a brake on the new framework. It is therefore calling for even stronger proposals and additional measures. Nevertheless, the Commission proposals would be a major step forward, as they provide new opportunities and more certainty and protection for service providers, businesses and investors.

With regard to stronger proposals and additional measures, Daniel Mareels, rapporteur for the EESC opinion on Crowd and peer-to-peer finance, said: "At least in the initial stages, there should be an even stronger focus on risk aspects associated with crowdfunding operations and markets in order to better identify them or mitigate them where possible and to ensure certainty and protection for all concerned parties".

Market deregulation would constitute higher risks for investors and could create an uneven playing field with traditional financial service providers. Other areas of tension could be the status of providers and their services and the unclear role of national supervisory bodies.

Apart from that, the coexistence of European and national regimes may give rise to confusion and uncertainty. In order to ensure clarity, additional obligations on authorities and supervisors to provide accurate, easily accessible information for all users or the obligatory use of the "EU label" for service providers could be options.

In its opinion, the EESC also urges the European Commission to (better) address the issues of money laundering, terrorism financing and taxation related to crowdfunding. It questions the limited possibility for subjecting crowdfunding platforms to existing rules on money laundering and terrorism financing and the restriction to finance projects only up to an amount of EUR 1 million.

Finally, the Committee encourages the introduction of provisions to regularly monitor, evaluate and measure the success of the proposed EU regime. Consultations and dialogue with all stakeholders and interested parties would be desirable.