AI in Financial Services: embracing the new reality

For more than a decade, the use of innovative technologies has been dramatically reshaping the financial services sector that we know. Use of online banking apps, chat-bots and innovative payment solutions has become a new normal for consumers around the globe and some more advanced technological breakthroughs like crypto-assets are becoming ever less strange area for a great number of people as well. In the background, financial institutions have been leveraging the use of new technologies for the more efficient provision of financial services, from cloud computing, algorithmic and high frequency trading systems all the way to the distributed ledger technology (DLT).

Aiming to achieve better cost and time efficiency as well as better customer experience and investment outcome, financial institutions are competing with each other in a continuous race all looking to get the answer to the same question: what is going to be “the next big thing”?

End of last year, the wider public was for the first time able to see the capabilities of generative artificial intelligence (AI) based systems following the release of the chat-bot called „ChatGPT”. This sent the shockwaves throughout the world as well as the clear signal to big enterprises, including the financial institutions, that investment in AI shall be put (back) on the top of their agenda in the years to come.

It is no secret anymore that businesses and governments around the world are increasingly focusing on AI since according to some estimations, it is expected that AI could contribute up to $15.7 trillion to the global economy in 2030 by increasing productivity across various sectors.

In our latest publication, our experts Dr. Verena Ritter Döring (Partner, Banking & Finance Regulatory) and Miroslav Đurić (Associate, Banking & Finance Regulatory) analyse legal and regulatory aspects of the use of AI based systems in the financial services sector, by focusing on the existing challenges and upcoming regulatory developments in this space.

Regulation of Buy-Now-Pay-Later in the EU: new regime on the horizon

1. Introduction

In recent years, boosted by the changing consumer habits in the wake of the COVID-19 pandemic, the e-commerce sector has experienced an exponential growth. This new environment has created particular fertile breeding ground for the rapid emergence of a new consumer financing model that is getting ever more popular, the so-called Buy-Now-Pay-Later (BNPL). Introduced first by financial technology firms (FinTechs), BNPL has rapidly become one of the most frequently used payment options in the e-commerce ecosystem promising the convenience and flexibility for consumers around the world.

In a nutshell, BNPL is a point of sale loan provided by the BNPL provider that enables consumers to purchase goods (usually online) with a simultaneous postponement of the payment date – for instance within 30 days as of the date of purchase. In a typical BNPL structure, once the consumer creates the purchase order and chooses BNPL as a payment option, at the point of sale the BNPL provider pays to the merchant for the product instead of the consumer. By doing so, the BNPL provider basically grants a credit to the consumer which is usually interest free conditional upon the consumer repaying the borrowed amount within the agreed period. Many consumers around the world, have started to use BNPL as a payment option of preference during the COVID-19 pandemic given that this gave them a chance to pay for the goods purchased online, after they receive and inspect them or eventually not pay at all should they decide to return the purchased goods to the merchant.

And while the e-commerce market was fast in adopting this new consumer financing model, the laws and regulations regulating the credit agreements, did not adapt at the same pace to this new environment leaving a space for license free operation of BNPL providers in many EU Member States.

2. Current situation in the EU

When it comes to regulation of BNPL providers, the current state of the EU financial regulatory framework is far from harmonized. The existing regime based on the Consumer Credit Directive, generally does not apply to the most common credit structures that BNPL providers are using. This is particularly the case with credit agreements involving a total amount of credit less than EUR 200 as well as credit agreements where the credit is granted free of interest and which has to be repaid within three months.

Further, national regulations of individual EU Member States also provide for specific exceptions to the application of consumer credit regulations to BNPL providers, in particular when it comes to provision of interest-free loans, small value loans as well as short-term loans.

However, even under existing framework, BNPL providers are not able to operate in every EU Member State without a license. Namely in Germany, where strict rules around the granting and taking of loans of any kind (including interest free loans) apply, BNPL providers are not able to provide their products to customers without triggering application of existing regulations. Namely, with the aim of avoiding application of strict regulatory requirements applicable to provision of credit (Kreditgeschäft), BNPL providers operating in Germany are frequently relying on a less onerous framework that applies to factoring firms under German law. In this structure, the BNPL provider basically acquires the merchant’s payment claim against the customer, pays the online merchant immediately, and allows the consumer to pay the amount owned later or in installments. Where an ongoing cooperation between the merchant and the BNPL provider exist in this structure, this generally constitutes factoring within the meaning of the German Banking Act (KreditwesengesetzKWG”), an activity for which special license issued by the German Federal Financial Supervisory Authority (Bundesanstalt für FinanzdienstleistungsaufsichtBaFin”) is needed.

As the awareness of the risks that BNPL structures may pose to consumers started to rise, some EU Member States have started to amend their national legislation with the aim of bringing BNPL providers under the scope of application of financial regulation. For Instance, in Ireland, BNPL providers were up until recently exempt from the supervision and regulation by the Central Bank of Ireland given that the interest-free deferred payment structures were falling outside the definition of “credit” set out in the Central Bank Act 1997. However, on 16 May 2022, the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 was commenced that aims to bring the BNPL providers under the scope of Irish financial regulation. The Act expands the definition of “credit” in the Central Bank Act 1997 by including within the definition “deferred payments” and “other similar financial accommodation” alongside cash loans. The provision of indirect credit is also within scope for the new Act for the first time which (among other) refers to the provision of credit by BNPL providers.

3. Revision of the Consumer Credit Directive

As part of its New Consumer Agenda launched in November 2020, on 30 June 2021 the European Commission adopted a legislative proposal that shall revise the existing Consumer Credit Directive. As a rationale for the proposed change of the existing regime, the Commission has pointed out that certain credit agreements that currently fall outside the scope of the existing Consumer Credit Directive, like short-term high cost loans whose amount is typically lower than the minimum threshold of EUR 200, can be detrimental for consumers, and as such shall be brought under the scope of existing rules applicable to credit providers. In the Commission’s view, other potentially detrimental products for consumers can also be interest free loans, that in the case of missed payment, can entail high fees or interest for consumers and as such, shall be equally regulated under the existing regime applicable to credit providers.

Against this backdrop, the Commission has concluded that these types of credit arrangements that BNPL providers are using, should be covered by the revised Directive, to ensure increased transparency and better consumer protection, resulting in higher consumer confidence.

Under the published proposal, the Commission is proposing significant expansion of the scope of application of the existing regime to:

  • credit agreements under EUR 200 and up to EUR 100 000;
  • leasing agreements that have an option to purchase goods or services (e.g. certain motor finance products);
  • credit agreements where the credit is granted free of interest and without any other charges; and
  • credit agreements under the terms of which the credit has to be repaid within three months and only insignificant charges are payable, capturing buy-now pay-later (BNPL) products.

Under the new rules, the lenders will also be required to ensure sure that consumers have easy access to all necessary information and that they are informed about the total cost of the credit, especially in digital and smart device friendly format that enables consumers to read all information contained in an advertisement or pre-contractual documentation. Further, the use of pre-ticked boxes in consumer agreements as well as certain tying practices will be completely prohibited.

On 2 December 2022, the Council and the Parliament announced that they had reached provisional political agreement on the revised text of the proposal. However, at the time of writing of this publication the revised text is still not published.

4. Outlook

With the proposed revision of the Consumer Credit Directive, which shall include introduction of the light-touch framework of BNPL providers, the EU Commission aims to achieve more harmonization in regulation of credit providers operating in the EU that shall enable all consumers in the EU to enjoy a high and equivalent level of protection of their interests within the well-functioning EU Single Market for financial services.

Despite being the first major jurisdiction that is openly looking to regulate BNPL sector, the EU does not appear to be alone in this race. For instance, in the UK, where BNPL models generally fall outside of Financial Conduct Authority (FCA) regulations, the Government is looking to amend the Consumer Credit Act 1974, with the aim of requiring BNPL providers to obtain FCA authorization and comply with the number of regulatory requirements when offering BNPL products to the UK customers.

And despite the increasing regulatory scrutiny, more companies are looking to include BNPL products as part of their service with the aim of joining FinTech firms in the battle for customers interested in BNPL as a payment option. In June 2022, Apple has announced that it will soon be launching a new payment option ‚Apple Buy Later‘, as part of their IOS 16, which shall allow their users to spread the cost of a purchase into four payments over six weeks. This type of initiatives together with the proposed regulatory framework that shall apply to all BNPL providers across the EU, may encourage more traditional banks to try entering into the space and to start testing this type of consumer credit product on their huge customer bases in the coming period.

Nonetheless, it is yet to be seen once the revised Consumer Credit Directive becomes operational, what practical impact will the new rules have on existing BNPL providers as well as new firms that are entering into the space in the coming years.

The EU Crowdfunding Regulation starts to apply: Overview & Practical Considerations (Part 2)


On 10 November 2021, the long-awaited EU Regulation on European Crowdfunding Service Providers, for business (Regulation (EU) 2020/1053) (the ECSPR) that aims to create a harmonised regulatory framework for crowdfunding platforms in the EU has started to apply.

In the first part of our publication we have analysed the scope of application of the ECSPR and the authorisation requirements that prospective CSPs will need to comply with under the new regime. In this second part of our publication we will take a closer look at the investor protection requirements under ECSPR and analyse the impact that the new regime will have on the existing regulatory framework on crowdfunding in Germany.

Investor Protection Requirements

Investor categorization & Entry knowledge test

In term of investor categorization, the ECSPR differentiates between sophisticated investors (professional clients under the MiFID II and persons meeting certain qualification criteria set out in Annex II of the new Regulation) and non-sophisticated investors. Whereas sophisticated investors will not be subject to any limitations when investing, non-sophisticated investors will be subject to mandatory entry knowledge test prior to investing in particular crowdfunding project. Therefore, prior to providing non-sophisticated investors with the full access to crowdfunding offers, CSPs will have to assess investors’ knowledge and experience, financial situation, investment objectives and risk awareness in order to assess which crowdfunding projects are appropriate for them. Periodic appropriateness assessment will have to be conducted every two years.

Key Investment Information Sheet (KIIS)

Inspired by similar concepts that have emerged years ago under the PRIIPs and the UCITS framework, the ECSPR requires CSPs to ensure that investors are provided with a so called Key Investor Information Sheet (KIIS) for each crowdfunding offer. Limited to maximum 6 A4 pages, the KIIS will have to contain key information about the project owner, the project itself, terms and conditions of the fund raising, risk factors, details on associated fees and costs as well as appropriate risk warnings. The KIIS will need to be drawn up by the project owner for each crowdfunding offer and CSPs will be required to have adequate procedures in place to verify the completeness, correctness and clarity of information contained in it.

Since the KIIS will neither be verified nor approved by the NCA like securities prospectus, project owners will be required to make proper disclosure thereto in order to warn prospective investors about the risks associated with investment in respective project. Lending based CSPs providing portfolio management services will be additionally required to draft the KIIS at platform level which shall contain key information on the CSP, available loans in which investors’ funds can be invested as well as information on fees and risks associated with investments.

Auto-investing and use of filtering tools

The use of commonly used filtering tools and automated systems have been also addressed in the new ECSPR. To that end, where filtering tools are available on the platform, based on which investor can shortlist available projects in accordance with the pre-specified criteria (e.g. economic sector, interest rate etc.), the results provided to investors are not to be considered as investment advice as long as information are provided in a neutral manner and without provision of a specific recommendation. On the other hand, CSPs using automated processes based on which investor funds can be automatically allocated to specific projects in accordance with predetermined parameters (so called auto-investing) will be considered as individual portfolio management of loans.

Right to withdraw

Non-sophisticated investors will be able to revoke their offer or expression of interest to invest in a particular crowdfunding offer, within a 4-day pre-contractual reflection period, without the need to provide any reason or to incur penalty of any kind. For this purpose, CSPs will need to provide investors with the clear information on the reflection period and the ways in which investors’ right can be exercised.

The impact of the ECSPR on national framework in Germany

Up until recently, the roles of fundraisers and investors in crowdfunding structures in Germany, could potentially fall under the scope of some regulated financial services.

  1. First, the lending activity of the investor itself could (under certain conditions) constitute the regulated activity of credit business (Kreditgeschäft) within the meaning of Section 1 paragraph 1 Nr. 2 of the German Banking Act (Kreditwesengesetz “KWG”).
  • Second the fundraising via crowdfunding platform could also trigger the licensing requirement for the provision of the so called deposit business (Einlagengeschäft) within the meaning of Section 1 paragraph 1 Nr. 1 KWG.

German national law and administrative practice of the German Federal Financial Supervisory Authority (BaFin) have stipulated a number of exemptions from these regulated activities whose application needs to be assessed always on a case by case basis (like for instance the frequently used exemption for qualified subordinated loans whose granting does not trigger either of the aforementioned regulated activities).

With the aim of bridging this regulatory uncertainty, the German national transposition law (Schwarmfinanzierung-Begleitgesetz), which was adopted on 10 June 2021, makes necessary amendments to KWG by stipulating that fundraisers and lenders that raise/invest funds via crowdfunding platform authorized under the ECSPR, are not to be considered to be providing either of the above mentioned regulated activities.

Further, public offering of securities can generally trigger prospectus obligation under the German Prospectus Act (Wertpapierprospektgesetz “WpPG”), where no exemptions apply. In line with the ECSPR, the national transposition law exempts securities offering made on crowdfunding platforms operating under the new regime from requirements under WpPG.

Timeline & Outlook

Whereas the ECSPR has started to apply as of 10 November 2021 for all in-scope CSPs, the Regulation provides for an additional transitional period for operators of crowdfunding platforms that were operating under national rules before the go-live date of the ECSPR. They will have to apply for a new license and bring their business in line with new requirements by 10 November 2022.

On 10 November 2021, ESMA has published the Final Report on Technical Standards (RTS and ITS) that shall help prospective European CSPs with preparation for compliance with new requirements. In addition to this, in February 2021 ESMA has also published Q&A that bring more clarity to questions around the use of SPVs in crowdfunding structures, transitional provisions and operational requirements under the ECSPR.

The ECSPR promises to overcome existing obstacles embedded in national regimes of individual Member States by enabling CSPs to provide crowdfunding services based on a single set of rules on a cross-border basis and project owners to raise funds from investors from all across the EU. However, it remains to be seen whether and to what extent will the new regime be accepted on the market and whether it will really meet the expectations of EU lawmakers and the crowdfunding industry.

The EU Crowdfunding Regulation starts to apply: Overview & Practical Considerations (Part 1)


On 10 November 2021, the long-awaited EU Regulation on European Crowdfunding Service Providers, for business (Regulation (EU) 2020/1053) (the ECSPR) that aims to create a harmonised regulatory framework for crowdfunding platforms in the EU has started to apply. The ECSPR was published in the EU Official Journal on 20 October 2020 after more than 2 years of long and intense discussions between EU lawmakers.

Unlike in the US where the first crowdfunding regulation was introduced already back in 2015[1], the EU did not have a common regulatory approach to this innovative way of fundraising which enables investors to directly invest in different projects of predominantly start-up companies and SMEs via online platforms. This lack of a harmonised regulatory framework has led to the creation of significant divergences in national rules on crowdfunding of various EU Member States which has been recognised as the main impediment to the provision of crowdfunding services on a cross-border basis in the EU.

With the aim of overcoming existing divergences in national frameworks, new Regulation provides a level-playing field for crowdfunding platforms in the EU, by introducing a harmonized set of rules that will be enable European crowdfunding service providers (CSPs) to explore the full potential of the EU single market.

In this first part of our publication we will analyse the scope of application of the ECSPR and the authorisation requirement that prospective CSPs will need to fulfil under the new regime.


The new EU framework on crowdfunding will cover two most common crowdfunding practices:

  1. the facilitation of granting of loans (lending based crowdfunding)
  2. placement of transferable securities and/or instruments admitted for crowdfunding purposes and/or reception and transmission of investors orders with respect to such instruments (investment based crowdfunding)

Only crowdfunding offers with a consideration not exceeding EUR 5,000,000 per project owner over a 12 month period will be under the scope of the ECSPR. Offers exceeding this threshold will need to be made in accordance with general requirements on public offering of transferable securities and provision of regulated financial services (e.g. under Prospectus Regulation, MiFID II etc.).

It is worth mentioning that some other types of crowdfunding practices, like donation-based crowdfunding or reward-based crowdfunding (in which case investors receive a non-financial consideration for their investment), will not be directly covered by the ECSPR.

Investment based crowdfunding

In terms of investment based crowdfunding, the ECSPR covers the placement of both transferable securities as well as other instruments admitted for crowdfunding purposes.

Transferable securities

The definition of transferable securities under the ECSPR is based on the definition under Art. 4 (1) (44) MIFID II. In the wake of ever-increasing use and popularity of crypto-assets the legitimate question that can be asked is whether crypto-assets can also be used for the purposes of fundraising in accordance with the new regime on investment based crowdfunding under the ECSPR? See our detailed analysis on this topic in our previous article.

Instruments admitted for crowdfunding purposes

This is a new definition introduced by the ECSPR which basically refers to shares in private limited companies issued by the project owner (or an SPV) that are not subject to transferability restrictions under national law. To this end, the EU lawmaker has decided to leave national lawmakers the possibility to allow or prohibit the use of shares in private limited companies for crowdfunding purposes. In Germany for instance, shares in private limited companies (Gesellschaften mit beschränkter Haftung „GmbH“) will not be suitable instruments for crowdfunding purposes, given that their transfer is subject to notarisation under national law.

Lending based crowdfunding

When it comes to facilitation of granting of loans the EU lawmaker emphasises that this crowdfunding practice shall be clearly distinguished from activities of regulated credit institutions that grant credits for their own account and take deposits or other repayable funds from the public. The operator of a crowdfunding platform acts as an intermediary who merely facilitate the conclusion of a loan agreement between the fundraiser (project owner) and the lender (investor) without at any moment acting as a lender or a fundraiser itself.

Under the ECSPR the term “loan” refers solely to an agreement in which a defined amount of money is made available to the project owner for an agreed period of time and which creates an unconditional repayment obligation of the lent amount (together with accrued interest) to investor in accordance with the instalment payment schedule. Despite seeming quite straight forward, this definition excludes certain types of loan agreements like for instance qualified subordinated loan agreements that have been frequently used in Germany as a way of circumvention of onerous national requirements on fund raising and lending.

Authorisation requirements

Legal entities that provide crowdfunding services within the meaning of the ECSPR will need to obtain authorization from the national competent authority (NCA) in their Member State of establishment and once authorized, they will be able to provide crowdfunding services across the EU on a cross-border basis (based on the EU passport for the provision of crowdfunding services).

Apart from being located in the EU, the prospective CSPs will also be required to fulfil a number of regulatory requirements for the purposes of authorisation under the new regime that can be summarized as follows:

Prudential requirements

Prudential safeguards need to be put in place in the form of own funds, insurance policy or combination of both equal to amount of at least the highest between:

  1. EUR 25.000, or
  2. one quarter of the fixed overheads of the preceding year, reviewed annually, including the cost of servicing loans for three months when the CSP also facilitate the granting of loans.

Entities that are already subject to CRR regime or are authorised as electronic money institution (under EMD) or payment services provider (under PSD 2) are not required to fulfil additional prudential requirements under this Regulation.

Conflict of interest & Inducements

In order to prevent potential conflict of interest, CSPs will be prohibited from having participation in crowdfunding offers offered on their platforms as well as from offering crowdfunding offers of persons closely related to them (i.e. their shareholders having more than 20% of shares/voting rights, their managers, employees or persons related to them).

The ECSPR also stipulates a „mini ban on inducements“ for CSPs by prohibiting them from paying or receiving any remuneration, discount or non-monetary benefit for routing investor’s orders to a particular crowdfunding offer offered on their or a third party platform.

Due diligence

Prior to listing crowdfunding offer on their platform, CSPs will be required to perform the necessary due diligence as regards whether the project owner has a criminal record and/or place of incorporation in a non-cooperative jurisdiction or high-risk third country. 

Provision of asset safekeeping & payment services

Given that in the course of crowdfunding intermediation, platforms usually need to collect investors’ funds (i.e. via wire transfer/credit card payment), place them on a designated account and then transfer them to the project owner account, the ECSPR sets clear boundaries with respect to provision of other regulated activities that can be essential part of this process. To that end, CSPs will be prohibited from providing payment services unless they hold a separate authorisation under the Payment Services Directive (PSD II) as well as custody services with respect to transferable securities where they are not authorised under the MiFID II or CRD IV framework.

Therefore, where CSPs do not hold above mentioned licenses to provide these services on their own, they will have to enter into cooperation arrangements with authorised third parties and inform their clients about relevant terms and conditions of service agreements and the fact that services will be provided by a third party.

Indirect effect of the AML/CTF rules

Besides bringing payment transactions for crowdfunding purposes indirectly under the scope of AML/CTF rules (by virtue of the fact that all payments will have to run through authorised payment providers that are obliged entities under the EU AMLD framework) the ECSPR does not explicitly bring CSPs on the list of obliged entities that are required to comply with rules on prevention of money laundering and terrorist financing. The recently published proposal of the EU AML/CTF Regulation, which we have analysed in our previous article, adds only crowdfunding service providers, operating outside the scope of the ECSPR to the list of obliged entities that are required to comply with AML requirements. Nevertheless, in one of its recitals[2] the ECSPR specifies that the EU Commission shall assess the necessity of adding the CSPs on the list of obliged entities in the future.

Individual portfolio management of loans

Allocation of pre-determined amounts of investors’ funds to one or several crowdfunding projects by CSPs in accordance with individual mandate will be defined as a provision of portfolio management services under the ECSPR in the case of which CSPs will be required to comply with additional requirements. The CSPs will have to properly define investment parameters for each portfolio management mandate and put in place effective systems and procedures on risk management, record-keeping and regular reporting to investors.

In the second part of our publication we will analyse the investor protection requirements that the prospective CSPs will need to comply with as well as the impact of the ECSPR on national regulatory framework in Germany.


[2] Recital 32 of the Regulation (EU) 2020/1503

Investment based crowdfunding and crypto assets – Challenges ahead

Crowdfunding Regulation

With the aim to overcome existing divergences in national frameworks on crowdfunding, in October 2020 the EU has adopted and published the long awaited final text of the Regulation on crowdfunding service providers (Regulation (EU) 2020/1503), the European Crowdfunding Service Provider Regulation “ECSPR”). The ECSPR provides a level-playing field for crowdfunding platforms in the EU, by introducing a harmonized set of rules that will be enable European crowdfunding service providers (CSPs) to explore the full potential of the EU single market.

The ECSPR covers two main types of practices used by crowdfunding platforms:

  1. Facilitation of granting loans (lending based crowdfunding)
  2. Placement of transferable securities within the meaning of Art. 4 para. 1 Nr. 44 MiFID II and/or instruments admitted for crowdfunding purposes that basically refer to shares in private limited companies that are not subject to restrictions that would effectively prevent them from being transferred (investment based crowdfunding)

Offers of financial instruments, either transferable securities or above-described instruments admitted for crowdfunding purposes under national law, of a single project owner whose total consideration is not exceeding 5.000.000 EUR will be eligible to be treated as crowdfunding offers and thereby will be exempted from more onerous requirements stipulated by EU and national rules on securities prospectus and securities issuing requirements.

The ECSPR will start to apply as of 10 November 2021. Crowdfunding service providers operating already under national regimes are provided with a 12-month transitional period within which they will have to ensure compliance with new rules.

Given that the ECSPR is primarily aimed to regulate crowdfunding service providers, the exact scope of application of the investment based crowdfunding in respective EU Member State can only be assessed based on relevant provisions of national law that implement MiFID II definition of transferable securities and define instruments that may fall under the definition of instruments admitted for crowdfunding purposes.

Investment based crowdfunding with crypto-assets – the new frontier?

In the wake of the ever increasing use of crypto-assets for fund raising, the legitimate question that can be raised is whether the crypto-assets can also be used for the purposes of fund raising in accordance with the new regime on investment based crowdfunding under the ECSPR.

Currently, most EU Member States do not stipulate de jure the possibility of issuing transferable securities via DLT or similar technology. However, majority of supervisory authorities across the EU tend to assess the legal status of each crypto-asset on a case by case basis by assessing its features based on various criteria like the level of standardization, tradability on financial markets etc.

  • Debt securities

In relation to crypto-assets with features of debt financial instruments (bonds, derivatives etc.) most supervisory authorities in the EU have taken pragmatic approach by assessing their legal status on a case by case basis and by treating them in accordance with applicable rules on issuance of financial instruments within the meaning of MiFID II. Nevertheless, there are also certain potential impediments to the issuance of debt transferable securities in tokenized form. These are particularly related to requirements under CSDR (e.g. requirement for transferable securities to be registered with CSD in book-entry form) as well as potential obstacles in national legislation like requirement for transferable securities to be represented in the form of a global certificate in physical form.

  • Equity securities

In addition to above mentioned challenges to tokenization of debt securities, the issuing of equity securities in tokenized form (in their literal meaning) has been prevented in most EU Member States due to open legal questions arising from company law that is barely harmonized at the EU level. Therefore, the possibility of using the new crowdfunding regulatory framework for the issuance and placement of equity based transferable securities depends largely on provisions of company law and securities law at national level. The recently published German Act on Electronic Securities (eWpG), which has for the first time allowed the issuing of securities in Germany in electronic or even crypto-form, is also one good example of how the issuing of tokenized shares can hardly be enabled by amendments of securities legislation. Due to related company law issues, German legislator has decided to make new provisions of eWpG solely applicable to debt instruments and units in investment funds, by leaving companies shares out of the scope of its application for the time being.

  • Reform of the MiFID II definition of financial instruments

With the intention to overcome the regulatory uncertainty around the application of MiFID II framework to crypto assets with features of financial instruments the European Commission has proposed in September 2020 a Directive that shall, among other, amend the MiFID II definition of financial instruments.

The new definition will be covering all types of financial instruments under MiFID II (including transferable securities) issued via DLT or similar technology as well. Due to the fact that MiFID II is a Directive, the revised definition will still need to be implemented into national law and currently significant divergences exist in national definitions of financial instruments across the EU. Last but not least, previously mentioned company law issues that prevent issuance of tokenized shares in many EU Member States and new laws on issuance of crypto-securities that fall short of covering all types of financial instruments in certain Member States (like in Germany) will represent challenges that will still need to be addressed. Until the new regime based on the expanded MIFID II definition becomes operational prospective the issuers of security tokens will still need to rely on national laws and the wide interpretative discretion of national supervisory authorities.

  • Instruments admitted for crowdfunding purposes

Looking into the issuing of instruments admitted for crowdfunding purposes (shares in private limited companies) in tokenized form, the picture doesn’t seems to be brighter either. The ECSPR stipulates explicitly that its definition and scope of application in relation to admitted instruments for crowdfunding purposes applies without prejudice to requirements under national laws that govern their transferability, such as the requirement for the transfer to be authenticated by a notary. To that end, EU Member States have a final say when it comes to deciding whether shares in private companies will be eligible to be used for crowdfunding purposes under the new regime. There is a fairly big chance that certain Member States will exclude shares in private limited companies from the scope of application of the new regime at national level by stipulating gold-platting provisions in national law. For instance, heavily criticized national transposition law in Germany, which was published in March this year, stipulates such an exclusion that will prevent shares in private limited companies of being used for crowdfunding offers under the new regime. Despite the fact that such measure would most probably just result in incorporation of fund raising SPVs in other EU jurisdiction (whose shares can still be offered on crowdfunding platforms anywhere in the EU) it cannot be excluded that some other EU Member State will follow similar approach.


Against the backdrop of everything mentioned above, it is fair to conclude that prospective fund raisers intending to leverage the new regime on crowdfunding as a less onerous regulatory framework comparing to regime under Prospectus Regulation will still largely need to ensure compliance with national laws in respective Member States from where they are intending to operate / set up an SPV for fund raising. The proposed EU Regulation on markets in crypto-assets (MiCAR) doesn’t seem to provide any further clarity to this topic either, because its scope of application will be limited solely to crypto assets that do not qualify as financial instruments under the MiFID II framework.

Therefore, despite the fact that the ECSPR has achieved significant progress in harmonization of rules on crowdfunding in the EU, there are still many challenges ahead that will need to be addressed before the crowdfunding as an alternative finance model starts to leverage DLT and crypto-assets in full capacity.

FinTech Action Plan versus Global Financial Innovation Network

As outlined in Part 3 of this series of posts giving updates on the European FinTech regulation agenda, the envisaged harmonized regulatory framework for financial innovation within the Single Market will be based on a comprehensive understanding of the innovative landscape within the financial market. Building the knowledge takes time and effort. It took EBA three and a half months after laying out its FinTech Road Map to publish the first analyses which form part of the FinTech Knowledge Hub.

The Knowledge Hub aims at fostering a better understanding of the innovative landscape within the financial market through facilitating the exchange of information between European and national regulators, innovators and technology providers. On this basis, a regulatory framework can be built that will fit the market’s demands and will support new innovative business models.

In contrast to the European approach, the Financial Conduct Authority (FCA) in London approaches the support for FinTechs in what seems to be at a first glance a more rapid way. Already in February 2018 the UK regulator encouraged the idea of a “global sandbox.” A regulatory sandbox allows the provider of innovative technology to offer his or her idea to a certain number of potential clients within the financial market for a limited period of time without the application of the full set of compliance, license and capital requirements. During this time the provider can assess if his or her innovative approach is worth the investment of full regulatory compliance. In the UK the possibility for FinTechs to approach the market via a regulatory sandbox has been successfully established in 2016.

Driven by the understanding that major emerging innovation trends (such as big data, artificial intelligence and blockchain based solutions) are increasingly global, rather than domestic, in nature, in February 2018 the FCA started an international dialogue with firms doing business, or looking to do business, in the UK or overseas, regulators, consumers, or any other interested party to assess what a global sandbox could look like. The FCA received 50 responses to their call in February with an overall positive feedback. Key themes to emerge in the feedback were:

Regulatory co-operation: Respondents were supportive of the idea of providing a setting for regulators to collaborate on common challenges or policy questions that firms face in different jurisdictions.

Speed to market: Respondents saw as one of the main advantages for the global sandbox that it could be reducing the time it takes to bring ideas to new international markets.

Governance: Feedback highlighted the importance of the project being transparent and fair to those potential firms wishing to apply for cross-border testing.

Emerging technologies/business models: A wide range of topics and subject matters were highlighted in the feedback, particularly those with notable cross-border application. Among the issues highlighted were artificial intelligence, distributed ledger technology, data protection, regulation of securities and Initial Coin Offerings (ICOs), know your customer (KYC) and anti-money laundering (AML).

Building on the FCA’s proposal to create a global sandbox, on 7 August 2018 the FCA has, in collaboration with 11 financial regulators and related organisations, announced the creation of the Global Financial Innovation Network (GFIN). The FCA is the only European regulator within GFIN. The other members are the Abu Dhabi Global Market (ADGM), the Autorité des marchés financiers (AMF, Canada), the Australian Securities & Investments Commission (ASIC), the Central Bank of Bahrain (CBB), the Bureau of Consumer Financial Protection (BCFP, USA), the Dubai Financial Services Authority (DFSA), the Guernsey Financial Services Commission (GFSC), the Hong Kong Monetary Authority (HKMA), the Monetary Authority of Singapore (MAS), the Ontario Securities Commission (OSC, Canada) and the Consultative Group to Assist the Poor (CGAP).

The idea of GFIN is to:

  1. act as a network of regulators to collaborate, share experience of innovation in respective markets, including emerging technologies and business models, and communicate to firms;
  2. provide a forum for joint policy work and discussions; and
  3. provide firms with an environment in which to trial cross-border solutions (business-to-consumer (B2C) or business-to-business (B2B)).

With the announcement of the creation of GFIN, the FCA also published a consultation document laying out a mission statement for GFIN and the idea of a global sandbox which is still based on the FCA’s concept thereof published in February. The consultation is addressed to innovative financial services firms, financial services regulators, technology companies, technology providers, trade bodies, accelerators, academia, consumer groups and other stakeholders keen on being part of the development of GFIN and will be running until 14 October 2018.

Although the knowledge centered approach of the EU for a regulatory framework for FinTechs within the Single Market surely is a reasonable approach, an international approach could have the advantage of providing speedier solutions and create a competitive advantage. With Brexit on the horizon, the FCA’s approach seems sensible and certainly a good move to keep their financial market up to date.

EBA konsultiert ein harmonisiertes Auslagerungsregime – Was erwartet den deutschen Markt?

Seit 22. Juni und noch bis 24. September 2018 konsultiert die EBA Richtlinien für ein harmonisiertes Auslagerungsregime. Anknüpfend an die Leitlinien zum Outsourcing des Commitee of European Banking Supervisors (CEBS) aus dem Jahr 2006, die nur für Kreditinstitute Anwendung finden, möchte die EBA nun einen gemeinsamen europäischen Rahmen für Kreditinstitute und Finanzdienstleistungsunternehmen, Zahlungs- und E-Geld-Institute schaffen. Erfasst sind von dem neuen Vorstoß damit Institute, die der CRR und der PSD2 unterliegen. Nach wie vor nicht erfasst sind Fondsmanager. Grund dafür ist einfach, dass die EBA für diesen Bereich nicht zuständig ist. Hier wäre eine Zusammenarbeit mit der ESMA, die für den Fondsbereich Leitlinien erlassen kann, wünschenswert gewesen.

Zu begrüßen ist der Vorstoß der EBA dennoch vor dem Hintergrund, dass gerade für die FinTech-Szene Auslagerungen ein wichtiges Thema sind. Etablierte Institute, die intern keine eigenen Innovationen entwickeln, suchen häufig Kooperationspartner aus der FinTech-Szene. Im Rahmen solcher Kooperationen werden innovative Ideen von den etablierten Instituten angeboten, aber die (IT-)Leistungen erbringen oft die FinTechs im Rahmen einer Auslagerung. Es ist sicher sinnvoll, auf europäischer Ebene einen gemeinsamen Rahmen für Auslagerungen zu schaffen, damit auch FinTech-Unternehmen, die grenzüberschreitend tätig sein wollen, nicht mehrere nationale Standards einhalten müssen, was wiederum Kosten verursacht. Die Empfehlungen der EBA zur Auslagerung an Cloud-Anbieter,die bereits im März 2018 veröffentlicht wurden, sind in die Konsultation integriert worden.

Nach dem Vorschlag der EBA werden die Anforderungen an das Auslagerungsmanagement und an Auslagerungsverträge für CRR-Institute und Zahlungsinstitute angeglichen. Die Vorgaben des Zahlungsdiensteaufsichtsgesetzes (ZAG), das für Zahlungs- und E-Geld-Institute gilt, waren bislang weniger streng als die des Kreditwesengesetzes (KWG), das für Kreditinstitute und Finanzdienstleistungsunternehmen Anwendung findet. In der Praxis orientierten sich aber auch Zahlungsdienstleister bereits an der Verwaltungspraxis der BaFin zum Outsourcing für Kreditinstitute. Ein neuer einheitlicher Rahmen verschafft hier Klarheit. Da der Proportionalitätsgrundsatz auch nach den konsultierten Auslagerungsleitlinien erhalten bleiben soll, können Institute und Zahlungsinstitute künftig weiterhin abhängig von ihrem Geschäftsmodell ihr Auslagerungsmanagement in angemessener Weise gestalten.

Zentrale Punkte bleiben weiterhin, dass Auslagerungen im Risikomanagement abgebildet werden müssen, dass interne Kontrollmechanismen etabliert werden, dass die Datensicherheit in jedem Fall gewährleistet bleibt und dass das Institutsmanagement die letzte Verantwortung für ausgelagerte Prozesse behält. Die Vorgaben an Auslagerungsverträge bringen ebenfalls keine Neuerungen. Festgeschrieben ist nun, dass Serviceleistungen, die eine Erlaubnis einer Aufsichtsbehörde erfordern, nur von lizensierten Dienstleistern erbracht werden dürfen. Jedes Institut soll künftig eine schriftlich festgehaltene Auslagerungs-Policy vorhalten, deren Vorgaben etwas ausführlicher sind, als das bisher der Fall ist. Eine recht aufwändige Neuerung ist, dass geplante Auslagerungen von kritischen oder wichtigen Funktionen, inklusive wesentlicher Auslagerungen an Cloud-Servicedienstleister, nach dem Entwurf der EBA künftig vorher der zuständigen Behörde angezeigt werden sollen. Auch wesentliche Änderungen in einem solchen Auslagerungsverhältnis sollen der Behörde zeitnah mitgeteilt werden. Hier wird abzuwarten sein, wie sich die Verwaltungspraxis entwickelt.

Der Vorschlag der EBA enthält auch Vorgaben zu Auslagerungen an Drittstaaten-Servicedienstleister. Ein Anwendungsfall für solche Drittstaaten-Auslagerungen kann laut EBA etwa sein, dass ein Drittstaateninstitut, das Zugang zum europäischen Markt hat oder sucht, nicht seine gesamte Infrastruktur neu aufbauen muss, sondern bestehende, im Drittstaat bereits vorhandene Infrastruktur (etwa in der eigenen Gruppe) im Rahmen einer Auslagerung auch für die innereuropäische Einheit nutzen kann. Damit ist die Konsultation der EBA auch für den bevorstehenden Brexit relevant. Sofern UK im Fall eines harten Brexits zum Drittstaat würde und UK-Institute Geschäftsbereich in die EU verlagern, kann so in einem gewissen Rahmen auch vorhandene Infrastruktur grenzüberschreitend genutzt werden. Es ist nun ausdrücklich geregelt, was bislang bereits galt, nämlich dass Bankgeschäfte und Zahlungsdienste nur an Dienstleister in Drittstaaten ausgelagert werden dürfen, wenn diese in dem Drittstatt beaufsichtigt sind und es eine geregelte Zusammenarbeit zwischen der Drittstaatenaufsicht und der zuständigen Aufsichtsbehörde in dem jeweiligen EU-Staat gibt.

Insgesamt handelt es sich bei der Konsultation um einen weitgesteckten Rahmen, der die derzeitige deutsche Auslagerungspraxis nicht wesentlich verändern wird.

FinTech Action Plan and EBA Road Map: Part 3

As outlined in Part 1 and Part 2 of this series of posts giving updates on the European FinTech regulation agenda, there is a political will to create a comprehensive and harmonized regulatory framework for financial innovation within the Single Market. Part of the Road Map to a regulatory framework is a FinTech Knowledge Hub, which is meant to facilitate the exchange of information between European and national regulators, innovators and technology providers. The Knowledge Hub will foster a better understanding of the innovative landscape within the financial market.

Three and a half months after laying out its FinTech Road Map, EBA delivers first products that form part of the FinTech Knowledge Hub.

The two documents published on 3 July 2018 are reports on the impact of FinTech on incumbent credit institutions’ business models  and on the prudential risks and opportunities arising for institutions from FinTech . Both reports contain an analysis of the impact of FinTechs on the current financial landscape and aim to raise awareness within the supervisory community and the financial industry of potential prudential risks and opportunities from current and potential FinTech applications. EBA wants to convey an understanding of the main trends that could impact incumbents‘ business models and pose potential challenges to their sustainability.

The first report, on the impact of FinTech on incumbent credit institutions’ business models, is an overview of the current market situation. It identifies four drivers for changes in current business models which are i. customer expectations and behaviour, ii. profitability concerns in the current low interest rate environment, iii. increasing competition and iv. regulatory changes such as PSD2 and GDPR. EBA identifies two main trends among the different digitalisation projects of the established institutions, namely digital transformation of internal processes and digital disruption by use of innovative technologies that aim to enhance customer experience. In the current FinTech ecosystem the prevailing model of interaction between FinTechs and incumbent institutions is one of collaboration and establishment of new relationships. In this way FinTechs can provide knowledge and ideas incumbent institutions have yet been too reluctant or too slow to establish themselves.

The second report, on prudential risks and opportunities arising for institutions from FinTech, is intended to raise awareness of and to share information on current and potential FinTech applications. The report focuses on seven use cases without making recommendations. The seven use cases are:

  1. Biometric authentication using fingerprint recognition,
  2. Use of robo-advisors for investment advice,
  3. Use of big data and machine learning for credit scoring,
  4. Use of Distributed Ledger Technology (DLT) and smart contracts for trade finance,
  5. Use of DLT to streamline Customer Due Diligence processes,
  6. Mobile wallet with the use of Near Field Communication (NFC),
  7. Outsourcing core banking/payment systems to a public cloud.

EBA focuses mainly on operational risk aspects, but also considers opportunities that may arise from the seven applications. The report is informative and provides a good overview for competent authorities and institutions alike of the current landscape and the inherent prudential risks that the market should be aware of.

Finanzaufsicht in Zeiten der Digitalisierung

Die Digitalisierung der Bankenwelt ist zur Zeit ein zentrales Thema. Digitalisierung ist ein positiv besetzter Begriff, der neue Geschäftsmodelle zu versprechen scheint und oft verwendet wird als Gegensatz zum Angebot traditioneller Banken. Neue Finanzprodukte von FinTechs, die innovativ oder gar disruptiv sind, zeigen neue Möglichkeiten einer Digitalisierung im Finanzmarkt. Auch soll durch die Auswertung von Big Data und die Verwendung von Algorithmen und künstlicher Intelligenz die Benutzerfreundlichkeit erhöht und die Kundenerfahrung verbessert werden – alles digital.

Gleichzeitig treten wichtige neue Fragen des Verbraucherschutzes, der Daten- und Cybersicherheit auf, die die Digitalisierung womöglich bremsen können und die Aufsicht auf den Plan rufen. Aber auch die Anbieter selbst betonen immer wieder, dass Datenschutz und Cybersecurity für alle Marktteilnehmer essentiell sind, um das Vertrauen der Kunden zu erlangen und zu halten.

Im Folgenden zeigen wir auf, welche Regelungen es im Zusammenhang mit IT-Sicherheit bereits gibt, wie die Aufsicht damit umgeht und ob der aufsichtsrechtliche Rahmen genug Raum lässt für die Digitalisierung bestehender und die Entwicklung neuer (digitaler) Geschäftsmodelle.

Wir betrachten zunächst, wie die BaFin mit der Digitalisierung der Bankenwelt umgeht und wie sie darauf reagiert. Hierzu gibt die Darstellung der Drei-Säulen-Strategie der BaFin im Umgang mit der Digitalisierung Aufschluss, die BaFin-Präsident Felix Hufeld am 10. April auf der BaFin-Tech in Berlin vorgestellt hat. Danach werden in der ersten Säule „Aufsicht und Regulierung“ die neuen Geschäftsmodelle und die Veränderungen der Wertschöpfungsstrukturen anhand des bestehenden Aufsichtsrahmens geprüft, während die zweite Säule speziell die IT-Aufsicht zum Gegenstand hat und die IT-Sicherheit der Unternehmen im laufenden Geschäftsbetrieb überwacht. In der dritten Säule beschäftigt sich die BaFin mit ihren eigenen Prozessen, um eine wirksame Aufsicht auch in Bezug auf innovative Strukturen und Geschäftsmodelle gewährleisten zu können. Das zeigt, dass die BaFin vom Zeitpunkt der ersten Beurteilung von Geschäftsmodellen an laufend die IT-Prozesse von Banken und Finanzdienstleistern überwacht, und in Ergänzung dazu auch selbst dazulernt. Die Darstellung von Herrn Hufeld passt zu den am 9. Mai 2018 veröffentlichten Schwerpunkten der Bankenaufsicht  für das Jahr 2018. Die Aufsicht bekennt sich darin explizit dazu, sich u.a. auf fehlende Angemessenheit und Sicherheit der IT-Systeme der Banken konzentrieren zu wollen.

Was heißt das konkret? Wir wollen im Folgenden einen Blick auf drei aufsichtsrechtliche Themen werfen, die vor dem Hintergrund der Digitalisierung und als Rahmen der IT-Aufsicht ein besonderes Augenmerk verdienen. Diese legen die Verwaltungspraxis der BaFin offen, die auch bei der Prüfung und Beaufsichtigung von neuen, innovativen Geschäftsmodellen berücksichtigt werden.

Das erste Thema sind die Mindestanforderungen an das Risikomanagement der Banken (MaRisk), die zuletzt im Oktober 2017 überarbeitet wurden. Darin enthalten sind nach wie vor allgemeine Anforderungen an IT-Systeme und die dazugehörigen Prozesse und Notfallkonzepte. Neu eingefügt wurde mit der letzten Novelle ein Abschnitt zu den IT-Risiken, die fortan noch expliziter überwacht und gesteuert werden müssen. Überwachungs- und Steuerungsprozesse müssen IT-Risikokriterien festlegen, IT-Risiken identifizieren sowie den Schutzbedarf und entsprechende Maßnahmen zur Risikobehandlung und Risikominderung festlegen. Die MaRisk als Teil der prinzipienbasierten Aufsicht der BaFin gibt hier nur grobe Anforderungen vor und lässt den einzelnen Instituten offen, wie sie diese Anforderungen individuell auf das jeweilige Geschäftsmodell passend umsetzen.

Zweitens sind die von der BaFin im November 2017 erlassenen Bankaufsichtlichen Anforderungen an die IT (BAIT) zu nennen, die die Vorgaben der MaRisk für den IT-Bereich konkretisieren. Die BAIT macht etwa Vorgaben zu IT-Strategien, zur IT-Governance, zum IT-Risikomanagement und zum IT-Sicherheitsmanagement. Es finden sich hier z.B. Vorgaben, die verlangen, dass ein Institut insbesondere das Informationsrisikomanagement, das Informationssicherheitsmanagement, den IT-Betrieb und die Anwendungsentwicklung quantitativ und qualitativ angemessen mit Personal auszustatten hat. Oder dass die Anforderungen eines Instituts zur Umsetzung der Schutzziele in den Schutzbedarfskategorien im Rahmen des IT-Risikomanagements festzulegen und in geeigneter Form in einem Sollmaßnahmenkatalog zu dokumentieren sind. Die BAIT weist die Verantwortung für die von ihr geregelten Bereiche mit IT-Bezug noch einmal explizit der Geschäftsleitung zu. Doch auch wenn auf 20 Seiten Vorgaben verschriftlicht werden, gilt dennoch, dass auch die BAIT wie die MaRisk lediglich weitere Prinzipien vorgibt, die von den Instituten ausgestaltet werden können, um ihr bestehendes Geschäftsmodell und auch neue, innovative Geschäftsmodelle sachgerecht und sicher abzubilden.

Ein dritter Punkt, der Erwähnung verdient, und zeigt, welchen Stellenwert der fachkundige Umgang mit IT-Themen in Banken für die BaFin hat: Die Bestellung von IT-Spezialisten zu Geschäftsleitern von Banken und anderen regulierten Instituten wird in der Verwaltungspraxis der BaFin derzeit begünstigt. Um das IT-Know-how auch in der Geschäftsleitung zu fördern, kann die BaFin im Einzelfall bei der Prüfung der fachlichen Eignung eines Geschäftsleiterkandidaten mit IT-Hintergrund für eine Bank oder ein Finanzinstitut entscheiden, dass eine praktische Vorerfahrung in der Führungsebene einer vergleichbaren Bank oder eines vergleichbaren Instituts von sechs Monaten (statt der üblichen drei Jahre) ausreichen.

Diese drei Beispiele zeigen, dass der bestehende Aufsichtsrahmen in Zeiten der Digitalisierung Bestand haben kann, denn aufgrund der prinzipienorientierten Aufsichtsvorgaben sind auch die IT-Innovationen in der Produktpalette von neuen Marktakteuren abgedeckt.

FinTech Action Plan and EBA Road Map: Part 2

Part 2: Further Guidance through EBA’s FinTech Roadmap

On 15 March 2018 EBA published its FinTech Roadmap which bridges the dichotomy between consumer protection and stability of the financial system through cybersecurity on the one hand and the support for financial innovation on the other hand. It becomes clear that EBA recognises the benefits of the innovative developments for the Single Market, which include enhancing consumer experience, cost efficiency for consumers and service providers and the need to support growth.

A harmonised regulatory framework for new technologies in the financial markets is needed. A provider of an innovative idea using new financial technologies might want to test his idea in the market. He will face different challenges in countries with regulatory sandboxes compared to countries where a inflexible regulatory regime applies. A regulatory sandbox would allow the provider to offer his idea to a certain amount of potential clients for a limited period of time without the application of the whole compliance, license and capital requirements. During this time he can assess if his innovative approach is worth the investment of full regulatory compliance. In countries where the regulatory regime applies from day one when the first client is approached and on boarded, the investment of the provider is much higher. This might in turn prevent financial innovations since the hurdle to become a (regulated) market player is quite high.

EBA did not provide a practical briefing for establishing consistent regulatory sandboxes in its Roadmap. It only announced that further analysis of already established sandboxes (as e.g. in the UK, in Singapore and in Australia) will be undertaken. EBA figures that by the end of 2018 best practice guidelines for regulatory sandboxes will be issued.

Until then the German regulator BaFin will impose the classical regulatory regime drafted for traditional players on the innovative developers of the financial markets, paired with a warning to consumers regarding the risk of buying virtual currency due to a lack of statutory consumer protection. So far BaFin published some generic guidance on its regulatory assessment of ICOs, but emphasised that a case-by-case evaluation will be inevitable. For other financial innovations such as for example crowd-funding platforms, it took more than two years until regulation on a national level complemented by BaFin’s administrative practice was established.

A comprehensive and harmonised regulatory framework which leaves room for innovation is essential for a growing and competitive Single Market. Hopefully, EBA’s planned FinTech Knowledge Hub, which will facilitate the exchange of information between regulators, innovators and technology providers, will add to this understanding. Up to now EBA did not provide concrete guidance for new market players. To be fair on the national regulators, without any leeway by the legislators there is not much room to ease the burden of the current regulation for new technologies through an administrative practice alone. Throughout 2018 at least, FinTechs will thrive in countries with a flexible regulatory approach that is backed by the relevant regulator.