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The European Union has reached a landmark deal to regulate the trading of cryptocurrencies throughout the bloc. The move is set to bring some much-needed clarification for fledgling fintech firms on what is and isn’t possible to incorporate into their latest iteration of open banking options for customers.
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EU member states and the European parliament congregated in late June to settle on the terms of rules that intend to keep consumers safe whilst enabling the market to continue to prosper.
Known as the Regulation on Markets in Crypto-assets (Mica), the rules stand as the continent’s first comprehensive effort to impose crypto standards for all member states. They will ultimately offer fintech firms the chance to conform to one set of rules, as opposed to the challenge of adapting to each nation’s approach to regulation.
Although some cryptocurrency enthusiasts remain passionate about the decentralized nature of crypto, and view regulatory measures as damaging for the ecosystem, the rules are likely to aid the growth of fintech firms and the open banking options that they can bring to users in a more sustainable fashion.
The regulatory measures are likely to restore more confidence in the crypto landscape, which has suffered significant losses over the course of 2022. In fact, since the asset’s peak on the 10th November 2021, the world’s most famous cryptocurrency, Bitcoin, has lost more than 71% of its value in just eight months. Furthermore, the entity cryptocurrency’s market capitalization has dropped by more than $2 trillion in the same time frame to less than $1tn at the time of writing.
“Recent developments on this quickly evolving sector have confirmed the urgent need for an EU-wide regulation,” noted Bruno Le Maire, French finance minister.
Statistics from 2021 show that the UK has led the way in terms of open banking solutions. However, the nation has long identified both the growth of the fintech industry and acceptance of cryptocurrencies as an excellent source of growth in the wake of Brexit.
In recent months, the UK government has even pledged to become a “global cryptoasset technology hub,” which would undoubtedly foster excellent opportunities for the growing fintech sector. As City AM reports, the government has also been willing to accept donations from cryptocurrency lobbyists – suggesting that there may be further regulatory lenience ahead.
For UK’s brokers, the news of the EU’s coherent and consistent regulatory plan for crypto is likely to be very welcome as opportunities for further growth beckons.
For platforms like Revolut, which have ambitions to become an open banking hub that enables users to not only manage their finance but to invest in stocks, cryptocurrencies, convert currencies, and to access comprehensive spending insights to shape future purchasing decisions, the opportunity to bring open banking solutions to Europe will likely be too good to pass up.
The EU’s decision on cryptocurrency regulation comes at a time when fintechs are striving to incorporate more crypto solutions into their open banking setups. In June, for instance, PayPal announced that the company would open up its closed crypto banking system whereby users could send and receive digital assets via external wallets and exchanges.
Now, as more clarity reaches European fintech firms, we can expect to see a movement whereby continental platforms begin to catch up with their UK and US counterparts.
Europe’s Fledgling Open Banking Platforms Draw UK Interest
Across the English Channel, the UK continues to rule the roost in terms of fintech solutions and open banking applications. According to the Open Banking Implementation Entity (OBIE), some six million active UK users now use open banking, with figures suggesting that the momentum generated in early 2022 has been sustained later in the year.
Now, UK fintechs are looking to Europe for expansion opportunities and the chance to embrace fresh technologies. For instance, London-based payments firm, GoCardless, recently announced a deal to acquire Latvian open banking data provider, Nordigen.
GoCardless’ bid to acquire the free-to-use open banking firm is a clear stepping stone in the company’s bid to position itself as the world’s primary bank payment network.
The move shows that GoCardless is accelerating its open banking strategy. The company will now be capable of free open banking connectivity at scale, whilst opening self-serve access to account information services to all users.
Given the high levels of expectation surrounding Web3.0, it’s expected that cryptocurrencies will play a key role in the future of open banking. With the EU’s first agreement on crypto regulation, we’re likely to see fintechs react by growing their reach on the continent.
Despite being cast in the shadows by uncertainty for some time on the continent, the future of cryptocurrency looks promising in Europe. Once the crypto market begins its recovery, we may see an acceleration of European open banking services catching up to their UK counterparts.
