The development of online financial ecosystems that support any modern economy depends on citizens’ use of new financial technologies.
In Malta, the word ‘fintech’ is neither defined by law nor found in the jurisdiction’s primary legislation. Nevertheless, local stakeholders on the island usually limit the meaning of the word to blockchain-based finance.
In reality, at EU level (and to some extent globally), fintech encompasses all the banking and digital payment solutions that use the internet and other electronic means instead of using ink and paper. These include electronic money institutions, payment service providers and banks that use any kind of mobile app or online banking website. Some legal writers go to the academic extent of classifying online investment platforms and ‘InsurTech’ as also part of fintech’s umbrella definition.
Actually the digital strategy1 of the EU Parliament (which was also adopted by the EU Commission) had outlined 19 points for its fintech plan which, among other things, “the promotion of innovative business models and the use of new technologies (eg artificial intelligence and cloud services), to increase the cyber security and integrity of the financial system, and to further enhance investor, consumer and data protection; and the introduction of regulatory sandboxes.” 2 In 2019, the European Parliament had noted that as happens in all online services, fintech services raise questions about consumer laws and data protection laws that would leave citizens unprotected if fintech services are not properly regulated.
While the introduction of MiCA by the EU in 2023 was greeted with a remarkable degree of hype, the EU legislature actually started introducing fintech legislation more than two decades ago. A few examples include:
- The Electronic Money Directive, which is currently dated 2009 but was originally introduced back in 2000. This directive ensures that Electronic Money Institutions (‘EMIs’) protect the money they receive in exchange for the electronic money they provide. The institutions using electronic money are not limited to traditional banks because EMIs can also issue electronic money.
- The Payment Services Directive which was originally introduced in 2007 as PSD1. It was then replaced by PSD2 in 2015.
- More recently, Regulation (EU) 2020/1503 on European Crowdfunding Service Providers was announced.
In this series of briefings, we will share insights on current and proposed EU laws related to fintech. Reference will also be made to the Maltese regulator’s approach to monitoring the conduct and prudential aspects of financial services offered electronically.
