The national regulatory status of FinTechs with innovative business models or delivery mechanisms shows two developments:

• the shift from non-regulated to regulated activities – notably payment initiation services and account information services now being subject to PSD2; and
• the ancillary/non-financial nature of the services provided by FinTechs not subject to any regulatory regime, with the exception of crowdfunding and to some extent activities related to cryptoassets.

The EBA findings show few national legislative developments that could potentially create an EU unlevelled playing field.

The EBA noted cryptoasset-related activity in the EU is relatively limited and, at this time, it does not "appear to give rise to implications for, or risks to, financial stability".

"However… typically cryptoassets fall outside the scope of EU financial services regulation… and specific services relating to cryptoasset custodian wallet provision and cryptoasset trading platforms do not constitute regulated activities under EU financial services law. Moreover, divergent approaches to the regulation of these activities are emerging across the EU", the report said.

More specifically, the EBA report examined: 

1. the application of current EU banking, payments, e-money and anti-money laundering laws to cryptoassets – concluding that current EU financial services laws does not apply to “a significant portion of activities involving cryptoassets”, but when considering cryptoassets on a case-by-case basis, some may qualify as ‘electronic money’ under EMD2 and ‘funds’ under PSD2;
2. cryptoasset custodian wallet providers and cryptoasset trading platforms – determining that certain services related to them may not constitute regulated activities under EU law; and
3. credit institutions, investment firms, payment institutions and electronic money institutions' activities involving cryptoassets and regulatory and supervisory issues – identifying the emergence of divergent approaches across the EU, which presents risks to the level playing field.

The EBA stated that a cryptoasset will qualify as ‘electronic money’ if it satisfies each element of the definition in EMD2 and may also fall within the definition of ‘funds’ for the purposes of PSD2 if it qualifies as ‘electronic money’.

Although it made clear most cryptoassets will not fall within these definitions, the report gave two clear examples of cryptoassets that could and reiterated that this must be determined on a case-by-case basis.

The EBA advised the Commission to carry out a cost/benefit analysis to assess holistically and in a balanced approach whether EU-level action is "appropriate and feasible" at this stage.

"Such a cost/benefit analysis should take account of the potential application of [distributed ledger technology] and cryptoassets beyond the financial sector, and should extend to aspects relating to the environmental impact of some cryptoasset activity," the report said.

The regulator added that the Commission is better placed to undertake this analysis since activities involving cryptoassets fall outside the scope of the supervisory remits of the competent authorities and therefore the latter do not have comprehensive data on cryptoassets activities outside the current financial services regulatory perimeters under EU and national law.

In addition, a cross-sectoral approach is needed since cryptoassets activities give rise to issues outside the financial sector.

The EBA also advised the Commission to take account of the latest recommendations and any further guidance issued by the Financial Action Task Force (FATF) in respect of what the global anti-money laundering body calls 'virtual asset' activities and, where possible, to promote consistency in the accounting treatment of cryptoassets.

The EBA's priorities are:

• monitoring the regulatory perimeter, including assessing current authorisation and licencing approaches to FinTech firms, and analysing regulatory sandboxes and innovation hubs to identify a set of best practices to enhance consistency and facilitate supervisory co-ordination;
• monitoring emerging trends and analysing the impact on incumbent institutions' business models and the prudential risks and opportunities arising from the use of FinTech;
• promoting best supervisory practices on assessing cybersecurity and promoting a common cyber threat testing framework;
• addressing consumer issues arising from FinTech, in particular in the areas of unclear regulatory status of FinTech firms and related disclosure to consumers, potential national barriers preventing FinTech firms from scaling up services to consumers across the single market, and the appropriateness of the current regulatory framework for virtual currencies; and
• identifying and assessing money laundering/terrorist financing risks associated with regulated FinTech firms, technology providers and FinTech solutions. 

As mandated by the European Commission's 2018 FinTech action plan, the EBA and the other European Supervisory Authorities (ESAs) (namely, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) will carry out specific tasks relating to FinTech.

Some areas of focus include authorisations issues, regulatory sandboxes and innovation hubs, knowledge sharing among FinTech firms, supervisors and regulators, and virtual currencies.

In respect of virtual currencies, the ESAs will work on the regulatory mapping of the current requirements on virtual currencies in order to assess whether the current framework is appropriate with a view of publishing an EBA report and/or opinion addressed to EU legislators.

The Roadmap also announces the creation of a FinTech Knowledge Hub to enhance knowledge sharing and foster technological neutrality in regulatory and supervisory approaches.

Andrea Enria, the EBA's Chairperson, said:

"The EBA's Knowledge Hub will ensure that EU supervisors share best practices and adopt a technologically neutral approach to the application of new technologies in the financial sector. This will help facilitate innovation and scalability across the single market."