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ESMA guidelines on FinTech in the first half of 2019


Throughout the first months of 2019 we have witnessed the publication of various position papers from regulatory authorities and European institutions in respect to FinTech. With regards to ESMA, in 2019, we highlight the following: (i) ESMA Report on Trends, Risks and Vulnerabilities on RegTech and SupTech and (ii) ESMA Report on Licensing of FinTech business models. 

   (I) ESMA Presents Report on Trends, Risks and Vulnerabilities on RegTech and SupTech:

One of the most relevant FinTech developments lies on RegTech – Regulatory Technologies – and SupTech – Supervisory Technologies, which are devised in response to demand and supply drivers.

In this context, ESMA has presented an analysis on these technologies under the report “Trends, Risks and Vulnerabilities”, of February 28th, 2019. While considering that “these technologies have the potential to reshape the relationship between regulators and market participants”, the article concludes that “RegTech tools have the potential to improve a financial institution’s ability to meet regulatory demands in a cost-efficient manner and help regulators to analyse increasingly large and complex datasets”.

This Report follows from the speech delivered from an ESMA expert on November 27th, 2018 intitled “RegTechs: Feedback from First Experiments” about the developments and existing challenges in RegTech and SupTech.

Considering the cautious approach from the supervisory and regulatory authorities with the “widespread use of cloud computing, the increased acceptance of Application Programming Interfaces (APIs) and advances in the fields of AI and Machine Learning (AI/ML)” it is very important to watch how these authorities are adapting to the new FinTech ecosystem.

   (II) ESMA Report on Licensing of FinTech business models:

Following the European Commission’s FinTech Action Plan of March 2018, the European Securities and Markets Authority (“ESMA”) presented on July 12th of 2019 the “Licensing of FinTech business models” Report. This is a result of one of the five action points of the European Commission Action Plan: the authorization and licensing of FinTech activities and business models. The Report is based on two Surveys conducted by ESMA (January 2018 and January 2019) “to gather evidence from national competent authorities (NCA’s) on the licensing regimes of FinTech firms in their jurisdictions” and intends to present thekey findings therein.

ESMA has sought to assess the licensing and authorization processes in different Member States in order to determine the main gaps, issues and key differences between “FinTech and traditional business models” within the existing legal frameworks.

To this extent, the report focuses primarily on the following four different areas, in which “regulatory gaps and issues have been identified”: (i) Classification of Crypto-assets; (ii) Governance and risk management processes; (iii) Innovation facilitators and authorising approaches for innovative FinTech business models; and (iv) the need for an EU wider Crowdfunding regime.


Guilherme Ribeiro Martins

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Guilherme Ribeiro Martins