European Securities and Markets Authority Issues Call for Evidence on Digital Finance

Following the publication by the Commission of its Digital Finance Strategy in September 2020, the Commission has asked the European Supervisory Authorities for technical advice on the regulatory and supervisory challenges of three areas, namely the growing fragmentation of value chains in finance, digital platforms and bundling of various financial services, and groups combining financial and non-financial activities.

The European Securities and Markets Authority has issued a call for evidence, closing on August 1, 2021, on aspects of the above three issues that it will cover in the technical advice, due to be submitted to the Commission by January 2022. ESMA notes that some of the risks and issues will be addressed through the two recent legislative proposals and is asking for feedback on the gaps that would still need to be addressed. The recent legislative proposals are:

• The proposed EU Digital Markets Act, published by the Commission in December 2020, which proposes new ex ante rules for gatekeeper platforms as well as a new supervisory framework at EU-level to address conduct and competition harm risks. Most of the large technology companies which are currently offering financial services are likely to be within its scope.
• The proposed EU Digital Operational Resilience Regulation (known as DORA), published by the Commission in September 2020, which aims to strengthen digital operational resilience and provide legal certainty on crypto-assets. The proposed Regulation would apply to credit institutions, payment institutions, electronic money institutions, investment firms, crypto-asset service providers, CSDs, CCPs, trading venues, administrators of critical benchmarks, trade repositories, managers of AIFs and insurance firms.

ESMA's call for evidence covers the three areas raised in the Commission's request for advice:

• the growing fragmentation of value chains in finance: ESMA flags that the key concerns are cross-border supervision, cooperation between different competent authorities, as well as legal responsibility for conduct, operational resilience of the entire value chain and prudential treatment;
• digital platforms and bundling of various financial services. ESMA's key concerns are consumer protection, conduct of business, money laundering and operational risk; and
• groups combining financial and non-financial activities, in particular large technology companies that establish financial services subsidiaries, which are able quickly to scale up their offerings in financial services leveraging the vast amounts of customers' data collected through their affiliated entities and elevating intra-group dependencies on operating systems and processes. ESMA's main concerns are conduct, prudential and systemic risks and a possible detrimental effect to the level playing field between entities providing the same financial services as a part of a group versus a single entity.

View ESMA's call for evidence on digital finance.

View details of the proposed DORA.

View details of the EU's digital finance strategy.

Return to main website.