As Britain puts into motion its exit plan from the EU, the European Commission could threaten London’s fintech position by introducing EU passporting rights and lower regulatory requirements for fintech firms.
In a report from Reuters, Valdis Dombrovskis, the EU’s executive vice president, said that the Commission is considering ways it can regulate the fintech sector to bolster development in Europe.
At a news conference in Brussels, he said:
We need to be cautious in our approach, ensuring that this new industry has a space to grow.
Since the Brexit result, which resulted in the nation voting to leave the EU, London’s position has often been questioned. Yet, despite this, it remains at the top. However, it certainly hasn’t been easy with many exit plans in place.
In the aftermath of the vote, France’s market regulator announced that leading banks in London were in the advanced stages of moving their operations to Paris. While international banks have threatened to move British jobs overseas, which could cripple the U.K.’s economy, if the Treasury fails to slow the country’s exit from the EU.
With Britain set to leave the European Union, it would lose passporting rights, which permits companies within the EU to trade between the European financial market.
Now, though, Dombrovskis is reported to have said that the Commission is exploring new rules that would provide fintech businesses passporting rights to ‘expand across borders and operate anywhere within the EU’s single market.’
It is also thinking about granting customized licenses, which would lower capital requirements for financial technology companies, thus delivering reduced risky services.
Such a move is unlikely to favor London’s position and could remove it from the top spot. Rivals such as Ireland and Germany are firm contenders that could move into first place.
Even though Britain won’t leave the EU until 2019, now is the time for it to act, ensuring the future of its fintech sector when it finally leaves the bloc at the end of its two-year divorce process.
The fact that the nation is struggling to fill fintech positions could be a sign for things to come while funding in the sector reported a decrease of 33 percent in 2016 to $783 million from $1.2 billion the previous year.
The next few years will certainly be a tough time for Britain as it negotiates the best terms possible for it to continue thriving once out of the EU, but it could also be the perfect opportunity for the nation to reaffirm to countless others why it is the best place for fintech startups.
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Last modified: May 21, 2020 9:59 AM UTC