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ESMA publishes report on the licencing of FinTech firms across the EU

ESMA published a report on the status of licencing regimes of FinTech firms across the EU. This Report provides an overview of the work ESMA conducted in cooperation with national competent authorities (NCAs) to map and assess the licensing approaches, divergences in national licensing regimes and identify whether there is a need to adapt EU financial services legislation to emerging innovative business models.

The Report is based on two surveys with the goal of collecting information from NCAs on the licensing regimes of FinTech firms in their jurisdictions, identify potential gaps and issues in the existing EU regulatory framework (gaps that would leave certain risks unaddressed or issues that would prevent innovations to reach their full potential) and assess how the existing national regimes might diverge.


The surveys confirmed that NCAs do not typically distinguish between FinTech and traditional business models in their authorizing and licensing activities since they authorize a financial activity and not a technology.


The key findings of the surveys are as follows:

  • The primary area where regulatory gaps and issues have been identified by NCAs and where FinTech firms do not fit neatly within the existing rules is related to crypto-assets, ICOs and DLT. The NCAs’ responses served to confirm ESMA’s Crypto Asset Advice, that certain tokens are financial instruments and subject to the full attendant regulation, while those tokens that are not deemed financial instruments should be subject to some minimal level of regulation. ESMA continues to foster supervisory convergence on the topic of crypto assets across Member States;


  • The surveys also identified the need for greater clarity around the governance and risk management processes associated with both cyber security and cloud outsourcing;


  • There are a direct link and inter-dependencies between the innovation facilitators and authorizing approaches for innovative FinTech business models. Innovation facilitators play a central role in mapping approaches applied to FinTech and in identifying the areas where the legislation and licensing requirements need changes and adaptation. Moreover, innovation facilitators, especially regulatory sandboxes, may have an impact on the licensing regime for FinTechs and may allow for divergence from other jurisdictions;


  • Further, there was the ongoing discussion as to the need for an EU wide holistic crowdfunding regime, in particular for crowdfunding based on non-MiFID II instruments. The regulation for crowdfunding service providers is under the scrutiny of the European Parliament and the Council and is expected to enable the level playing field for cross-border service providers.


ESMA made a conclusion that at present most innovative business models can operate within the existing EU rules. Therefore, ESMA reiterates its conclusions made in the recent reports regarding crypto-assets/ICOs/DLT, cyber security and innovation facilitators, and does not put forward additional recommendations for changes in EU regulation at this stage, in line with the EBA and EIOPA conclusions in their respective reports.

The full Report is available here.


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