New technologies in banking and payments are revolutionising the financial services industry. To embrace this transformation, the European Union has launched, over the past years, several initiatives aimed at fostering digitalisation within the finance sector while addressing cybersecurity threats.
The long-term objectives are to position Europe as a leader in financial services, enhancing their efficiency, security, and accessibility, fostering innovation and competitiveness in the field, alongside ensuring consumer protection. These initiatives aim at encouraging digital payment methods, regulating cryptocurrencies and blockchain technologies, promoting digital operational resilience, establishing the digital Euro, and creating a finance data space for data-driven innovation in the sector. Political confrontation prevented some of them from being adopted during the current term.
As we approach the beginning of a new EU institutional cycle, marked by the election of a new European Parliament and the start of a new Commission mandate, the increase in power of right-wing forces at the EU level makes the fate of pending financial services and payments files uncertain. While the competitiveness-oriented positions of the moderate EPP and Renew groups will likely be beneficial for said initiatives, the populist and Eurosceptic stances of the rising extreme-right might present an obstacle to their progress.
Key pending Digital Finance and Payment Files
- The proposal for the Establishment of the Digital Euro aims to introduce a digital currency issued by the European Central Bank to complement its physical form (Euro banknotes and coins), to offer citizens a safe form of currency in the increasingly digital economy and enhance the efficiency of transactions while ensuring privacy and security. The file has suffered from delays in the Parliament, and yet the Plenary will not adopt a position during the current mandate. The Council of the EU still needs to reach a common position on this.
- Proposal for a Regulation on a Framework for Financial Data Access aims to promote data-driven innovation in the financial sector by establishing a common financial data space. This will allow real-time access to financial information, facilitating business-to-business data sharing within the EU to improve financial products for consumers. The Parliament and Council of the EU still need to approve their positions.
- The Proposals for a Regulation on Payment services in the internal market (PSR), and a Directive on Payment services and electronic money services in the internal market (PSD3), set harmonised rules for consumer protection, payment services and their providers. Their objective is to enhance security and facilitate integration of new payment technologies in the EU financial market. The Parliament Plenary adopted its position in the first reading on 23 April, while discussions are still ongoing in the Council of the EU.
- The Anti-Money Laundering (AML) package (composed of a Regulation and a Directive with an established European Authority) strengthens the EU’s anti-money laundering and countering terrorism financing rules to improve detection of suspicious activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities. The files are close to formal final adoption, but the secondary legislation and technical standards are necessary for the full application of the AML package’s provisions.
- The Regulation on markets in crypto-assets (MiCA) sets out standards for issuing crypto-assets and providing related services to support innovation, fair competition while ensuring consumer and investor protection. It empowers the Commission to adopt delegated and implementing acts detailing the compliance requirements for competent authorities and market participants. EU Elections may delay MiCa’s implementation, given the Parliament’s right to raise objections.
- The Digital Operational Resilience Act (DORA) is a Regulation that establishes uniform requirements across the financial sector in the EU to ensure that financial institutions can mitigate and withstand cyber and other ICT-related risks. It empowers the Commission to adopt delegated and implementing acts detailing the compliance requirements for competent authorities and market participants. EU Elections may delay DORA’s implementation, considering the Parliament’s right to raise objections.
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