Shearman & Sterling LLP | FinReg | European Commission Launches Consultations on Digitalization in the Financial Sector
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  • European Commission Launches Consultations on Digitalization in the Financial Sector

    The European Commission has launched two consultations on digitalization in the financial sector. They form part of the EU’s new Digital Finance Strategy which aims to deepen the Single Market for digital financial services, promote a data-driven EU financial sector while addressing the risks inherent in that and enhance the digital operational resilience of the financial system. The first consultation paper focuses on crypto-assets and seeks participants’ views on a framework to support the development of crypto-assets while addressing the risks they pose. The second consultation paper focuses on the digital operational resilience of the EU financial sector and the establishment of an EU-wide framework to support existing measures on ICT security and risk management. Responses to both consultations should be submitted by March 19, 2020. The Commission may consult on other issues in the coming months.

    The first consultation document, “On an EU framework for markets in crypto-assets”, seeks feedback on four separate areas. The first section sets out a series of questions for the general public regarding their use and experiences of crypto-assets. The following three sections are targeted at public authorities, financial market participants and market participants in the crypto-asset sector. The second section seeks feedback on the need for, and nature of, a classification of “crypto-assets”, to determine the extent to which they fall within the EU financial services regulatory perimeter and the need for differentiating between different types of crypto-assets. The third section focuses on crypto-assets that are not currently covered by EU legislation and asks respondents for their views on the opportunities and challenges raised by such crypto-assets generally, as well as those specifically raised by stablecoins and global stablecoins. Responses are also sought on the usefulness of a bespoke regime for crypto-assets, the nature of crypto-asset service providers and on the issuance of crypto-assets. Questions are also posed on market integrity, anti-money laundering/counter-terrorist financing, consumer protection and supervision and oversight of service providers in the crypto-asset sphere. The fourth section focuses on crypto-assets that are currently covered by EU legislation, which include security tokens and e-money tokens. Security tokens are crypto-assets issued on distributed ledger technology that qualify as transferable securities or other types of MiFID financial instruments. Respondents are asked to give details of recent market developments regarding security tokens and for their views on appropriate approaches to security tokens under existing EU legislation. Finally, views on EU legislation governing e-money, including the E-Money Directive and the Payment Services Directive, are sought.

    The second consultation document, “Digital Operational Resilience Framework for financial services: Making the EU financial sector more secure” gathers stakeholders’ views on certain aspects of a future framework for EU cross-sectoral digital operational resilience, including: (i) strengthening the digital operational resilience of the financial sector, in particular relating to ICT and security risk; (ii) the main features of an enhanced legal framework; and (iii) the impacts of the potential policy options. The paper identifies public authorities, industry, SMEs and financial services providers, consumers and academia as relevant stakeholders for the purposes of the consultation.

    The Commission is also concurrently seeking feedback on its proposed roadmaps for the consultations. The roadmaps describe the problems being tackled by the consultations, explain why EU action is needed and set out the scope of the Commission’s proposals. Respondents are encouraged to provide feedback on the proposed roadmaps by January 16, 2020. The Commission will provide reports summarizing the input received and the extent to which suggestions will be taken on board.

    View the Commission's consultation on an EU framework for markets in crypto-assets.

    View the Commission's consultation on its EU framework for markets in crypto-assets roadmap.

    View the Commission's consultation on digital operational resilience in financial services

    View the Commission's consultation on its digital operational resilience roadmap.

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