Georgiana Evi and Nicolae Grasu, Clifford Chance Badea

Authors: Georgiana Evi, senior associate, and Nicolae Grasu, lawyer Clifford Chance Badea

Last week, the European Commission (the "Commission") published a package to support digital finance for Europe. This package also includes the Commissions' strategy in this field, which sets out the four priorities in this respect. 

This strategy comes in the context of the new reality of 2020, marked by the COVID-19 pandemic that accelerated the adoption of digital solutions in almost all areas, including financial services. Largely based on Fintech solutions, these digital solutions have helped credit institutions control the impact of the pandemic and strengthen their relationship with customers. 

In the last six months, banks announced significant investments in this area, including Romania, either by launching new digital solutions, or improving existing ones. It should be noted that this approach comes at a time when the IT field – which, until recently, had a rather supporting role in the life of a company – has become a key part in the innovation and expansion process of companies in recent years. 

The four priorities of the EU strategy for digital finance 

The Commission's strategy envisages four priorities for the digital transformation of various financing methods in Europe. It is worth mentioning that the success of this process, given its complexity, requires cooperation at the level of several competent European institutions.

• Removing fragmentation in the Digital Single Market 

In order to enable European consumers' access to cross-border services and to help European financial companies step up their digital operations, the Commission is considering a number of measures to amend the legal framework on anti-money laundering and counter-terrorism financing and the e-IDAS Regulation¹, as well as the development of guidelines by the European Banking Authority and other European supervisory authorities. Simultaneously, relevant aspects concerning data protection will be clarified with support from the European Data Protection Board. The aim of these measures is to ensure the basis for the legal framework to be implemented which will allow the use of interoperable European identity solutions for "on boarding"²by all European users, by 2024. 

By 2024, the Commission also envisages measures regarding passporting³, and the passporting principle is to be applied in all those areas with strong potential for digital finance. For example, provisions similar to those regarding passporting in the Crowdfunding Regulation and in the proposed Markets in Crypto-assets Regulation could be used to regulate other fields, for example in the context of assessing prudential regulation of non-bank lending. 

Other issues to be addressed under this priority direction also include certain regulatory issues in the area of payment services (for example, practices where foreign IBAN account numbers are refused), as well as the establishment of a platform for digital finance at EU level.

• Adapting EU regulatory framework to encourage and facilitate digital innovation, considering the consumers' rights and interests as well as market efficiency 

Blockchain technology, crypto-assets and artificial intelligence are solutions of great interest for the evolution of various finance methods in Europe. As a result, the Commission proposes a regulation for crypto-assets, and guidelines to be developed in the coming years at the level of competent European supervisory authorities to clarify the application of existing artificial intelligence legislation, from the point of view of the supervisory obligations of these authorities. 

The Commission also considers promoting the use of cloud infrastructure, as well as software investments. In this respect the Commission proposes the creation of a European cloud services marketplace by the end of 2022 to facilitate access to alternative cloud service providers, including in the financial sector. 

At the same time, to promote software investments, the Commission will shortly adopt regulatory technical standards developed by the European Banking Authority to facilitate digital transformation in the banking sector. 

• Establishing a European common space to promote data-driven innovation, including by facilitating access to information and information sharing in the financial sector 

In order to establish such a common space, the Commission envisages measures such as facilitating real-time access to all public information regulated by the financial services legislation or promoting the use of new digital solutions in the reporting and supervision activity in the financial sector. Finally, the Commission proposes the development of the "open finance"⁴concept, by setting out a wider finance framework by mid-2022 together with reviewing and assessing the Payment Services Directive⁵.

• Addressing new challenges and risks associated with digital transformation, considering the "same activity, same risk, same rules" principle

The Commission considers to adjust by mid-2022 the legal framework applicable to financial services as regards consumer protection and prudential rules, so as to protect the interests of end-users of digital finance, to safeguard financial stability, to protect the integrity of the EU financial sector and ensure a level playing field.

Conclusions and perspectives 

The digital finance strategy for the EU sets forth a series of objectives and measures for the coming four years which could radically change the present finance method, irrespective of the financing source. Nonetheless, together with the digital finance strategy and in line with it, the Commission published several legislative proposals aiming, among others, at the regulation of crypto-assets, a pilot regime for market infrastructure based on distributed ledger technology (DLT), digital operational resilience or changes to the directives regarding financial services in the European Union. 

The reality of the last few months showed us that digital transformation is a necessity, even though not long ago it was only a medium- or long-term objective, for an adaptable and strong economic environment. As far as the local market is concerned, we'll have to see the Romanian legislator's ability to implement in due time the new regulations and changes to existing regulations which are announced for the forthcoming years at EU level, so as to keep up with the new digital reality.

1^Regulation (EU) No. 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC.

2^The possibility of new customers to access financial services quickly and easily.

3^The principle in the single market according to which consumers and companies should have access to cross-border services provided by firms established and supervised in another Member State, in line with commonly agreed rules.

4^The sharing and use of customer-permissioned data by banks and third-party providers to create new financial services.

5^Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC.