Fulfilling its mandate under the European Commission's FinTech Action Plan to map the current authorization and licensing approaches for innovative FinTech business models in Europe, the European Securities and Markets Authority (ESMA) has published a report on the licensing of FinTech business models. The report sets out the key conclusions identified from the information collected from national regulators through two surveys that ESMA conducted in the last two years, and some of the actions that have been taken to address the emerging challenges. The report does not make any recommendations, but instead refers to previous advice and reports that make recommendations for an EU-level response to the issues.
The report confirms that national regulators consider that crypto-assets, initial coin offerings and distributed ledger technology are areas where there are regulatory gaps within the existing rules. In particular, national regulators would like further clarity at EU level on the definition of financial instruments and how that applies to crypto-assets. ESMA's view is that its Crypto Asset Advice to the Commission deals with the issues raised, as it identifies the gaps in the existing EU regulation and calls for a bespoke regime to be introduced for any tokens that fall outside of those rules.
The report also refers to the need for further clarity on:
- The governance and risk management processes for cyber-security and cloud outsourcing. ESMA notes that the European Supervisory Authorities have issued joint advice on each of these topics.
- Enhanced convergence in the use of innovation facilitators, including regulatory sandboxes. ESMA notes that the report published in January this year by the ESAs and the aims established by the European Forum of Innovation Facilitators in April 2019 are intended to address this point.
- An EU-wide comprehensive crowdfunding regime. ESMA confirms that the proposed EU regulation for crowdfunding service providers is still going through the legislative process.
