European Supervisory Authorities Publish Report on Digital Finance

The European Supervisory Authorities (the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Banking Authority) have published a joint report on digital finance and related issues, in response to the European Commission's Call for Advice on digital finance, which was published in February 2021. The Call for Advice sought input to advance the EU Digital Finance Strategy, which was launched in September 2020 and set out the EU's plan to review the EU financial services legislative framework in light of developments in digital finance in order to safeguard financial stability and protect consumers. 

The ESAs' Report contains 10 recommendations for digital finance regulation, together with two insurance-specific recommendations. The 10 recommendations include that:

• the Commission should take a holistic approach to regulation and supervision of the entire financial services value chain, including the use by financial institutions of third-party service providers;
• EU disclosure requirements should be reviewed to ensure they are fit for the digital age and to protect consumers against the risks of mis-selling;
• data protection obligations in the customer due diligence and anti-money laundering/counter terrorist financing context should be reviewed and consideration should be given to whether all crowdfunding platforms should be subjected to the EU AML/CTF legislative framework;
• financial and non-financial services authorities should develop frameworks to enhance cooperation and promote information-sharing on policy developments; and
• the ESAs should actively monitor the use of social media in financial services and assess whether any regulatory action is required as part of future work.

The insurance-specific recommendations relate to the current Solvency II requirement on the scope of (re)insurance activities and the treatment of P2P insurance.

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