BDLTs – by their de-centralised or distributed nature – have the potential to transform the current architecture or design of areas of the financial system. They present several potential benefits for citizens, such as a more accessible and innovative financial system and improved security, as well as reduced back-office costs for businesses. But they also entail several legal and regulatory challenges, ranging from consumer protection mechanisms, to enforcement methods and possibilities of tax evasion, money laundering and the sale of unlawful goods.
On 25 April, ACCA and EY organised a lively debate with EU decision-makers and experts to shed some light on the risks and opportunities of BDLTs, a few hours ahead of the adoption by the European Parliament’s Economic and Monetary Affairs (ECON) Committee of the draft report on "FinTech: the influence of technology on the future of the financial services".
MEP Cora van Nieuwenhuizen, who led ECON’s report on FinTech said:
’Europe doesn’t have the best starting position or the best legislation. We need to look forward and past the financial crisis because the rest of the world is moving on. When it comes to the global race to FinTech, it is important to remember that if we are not at the table, we will be on the menu. While it is still too early to take targeted policy actions, it is now up to the markets to identify how blockchain technologies can be used.
The European Parliament’s report on FinTech emphasises that this technology is still at the early phase. It calls for increased experimentation with blockchain technology by entrepreneurs and supervisors together, to create a mental shift from supervisors, often focussed on rule-based and ticking-box exercises, and move towards supervisors with more positive and innovative thinking’.
The debate revealed that while it is too early to contemplate regulatory solutions, there was a general agreement that future EU legislation and supervision for FinTech should be risk-based and proportionate to avoid hampering the emergence of this new sector with rules that are too rigid and which would punish innovators.
On the contrary, the focus should be on creating an enabling regulatory environment. All the speakers agreed that it is now time for testing potential applications for blockchain, both from a public and private sector perspective, in a collaborative -and inclusive way. The critical issue of improving financial literacy, and the financial and accounting skills of individuals, as well as the current skills gap were also raised.
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