The EU’s securities markets regulator has responded optimistically to the European Commission’s consultation on a new digital finance strategy for the European Union.
European Securities and Markets Authority (ESMA) welcomed the proposal, noting that it built on the 2018 FinTech Action Plan that set a number of deliverables for the ESAs, all of which were completed.
“Cooperation around financial innovation at EU level is key to remove fragmentation in the digital financial services market,” the regulator said in a statement. “ESMA believes that certain specific initiatives would support this goal, such as developing digital financial identities, that are usable and recognised throughout the EU, based around the existing ISO 17442 global standard of the Legal Entity Identifier. ESMA’s response also outlines several conditions needed for a well-regulated data-driven financial sector, including appropriate skills, data standardisation and data security.”
ESMA also highlighted some of the risks and benefits of digitalisation of the financial sector. Benefits include increased speed, efficiency, convenience and greater economies of scale as well as automated tools that help firms and authorities detect cases of poor conduct. Risk areas include data security, operational incidents, data privacy, pricing, sales practices and the financial exclusion of some individuals.
It also called for a technology-neutral EU financial services regulatory framework that supports innovation. “An EU-wide harmonised regulatory/supervisory framework is necessary to allow innovative firms in the EU to reach the scale that they need and provide for the necessary safeguards to investor protection, financial stability and orderly markets,” ESMA said.
Moreover, the regulator called for the removal of fragmentation in the single market for digital financial services.
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