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EU watchdog calls for fresh and fast regulation on digital finance

EU watchdog calls for fresh and fast regulation on digital finance

According to European regulators, rapid action is needed to update how cross-border digital finance services are scrutinised within the region and consumers are protected as the sector becomes digitalised with “Big Tech” playing an increasing role.

Consumers are moving further into social media and using smartphones for anything from buying and selling shares, moving money around bank accounts and making payments, a trend accelerated by the COVID-19 pandemic, leaving regulators playing catch-up.

“Digital finance has unlocked new synergies between financial and non-financial activities that potentially introduce systemic risk into the market for financial services,” a joint report from the EU’s banking, insurance and markets watchdogs said.

Cloud computing, or banks and other financial firms using outsourced providers for services, is booming, the report said.

It is sometimes unclear how to categorise some digital financial services under existing rules, creating uncertainty over data privacy, anti-money laundering safeguards and how much capital they should be holding, the report said.

It called on the bloc’s executive European Commission, which has opened a public consultation on digital finance, to take a “holistic” view of supervising financial services.

Mixed Activity Groups – MAGs

New “supervision structures” may be needed to capture transactions spread across “Mixed Activity” Groups or MAGs, such as Amazon , Google, Meta’s Facebook, Apple and other Big Tech firms offering financial and non-financial services.

The crash of German payments company Wirecard demonstrated that complex arrangements within a group providing both financial and non-financial services create specific challenges for supervisors, the report said.

“The growing digitalisation and datafication of financial services necessitate closer cooperation between financial and relevant non-financial authorities,” the report said.

The report said that regulatory action may be warranted given that some posting on social media are effectively advertisements.

“In securities markets in particular, the growth of digital trading platforms has coincided with new trends, such as ‘social trading’, or investment advice shared over social media—which brings new opportunities but risks as well.”


The post EU watchdog calls for fresh and fast regulation on digital finance appeared first on Payments Cards & Mobile.

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