The European Commission has proposed a pilot project on the blockchain with the intention of bettering its regulation.
The draft communication was addressed to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions. In the report, it said that a pilot project would be aimed at reinforcing the capacity and technical expertise of national regulators regarding the distributed ledger technology.
The report noted that a major challenge in the following years will be to ‘create an environment in which financial innovation for the benefit of consumers can thrive.’
Innovation firms regularly express concerns that EU and Member State legislation and supervisory practices limit their ability to innovate and to offer services across borders.
It adds that many are unsure where the services they are providing fit into current regulations, which could potentially see them experience a ‘disproportionate, inconsistent or over-cautious application of regulatory requirements’ that may not be the best answer to these new amenities.
While innovation can present new challenges to the way financial services work, regulators and supervisors need to ensure that consumers are protected and the market remains stable. Several EU financial services have already taken steps to be more proactive, creating new methods to provide support for the development of new firms while learning from them at the same time.
Last year, the European Parliament approved a task force to study the blockchain. Jakob von Weizsäcker, who drafted the proposal, stated that the creation of it was to monitor the development of the technology and make specific regulations when needed.
The EU Commission also announced last year the unveiling of a new initiative to give as many of Europe’s fintech and blockchain entrepreneurs the opportunity to become world leaders, giving them access to potential investors, business partners, research centres and universities.
London is one city that is enjoying a boost in its fintech sector due to assistance from regulators at the Financial Conduct Authority (FCA). Through the launch of its Project Innovate, regulators are providing aid to startups when it comes to blockchain and the regulations they need to follow.
Last year, the FCA announced that it had approved the first 24 companies that would be taking part in its regulatory sandbox. By doing so, ideas can be brought to the market quicker, thus boosting the financial technology industry in the U.K.
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