On 14 April 2021, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) held a committee meeting in which it discussed the main legislative proposals under the European Commission’s (Commission) Digital Finance Strategy. During the discussion, the committee members considered the draft reports on the following legislative proposals:
- Proposal for a Regulation on Markets in Crypto-Assets (MiCA), led by rapporteur Stefan Berger (European People’s Party (EPP), DE).
- Proposal for a Regulation on Digital Operational Resilience for Financial Services (DORA), led by rapporteur Billy Kelleher (Renew Europe (RE), IE).
- Proposal for a Regulation establishing a pilot regime for market infrastructures based on distributed ledger technology (DLTR), led by rapporteur Johan van Overtveldt (European Conservatives and Reformists (ECR), BE)
Please find an overview of the discussions on the different legislative files below.
- Proposal for a Regulation on Markets in Crypto-Assets
Rapporteur Stefan Berger (EPP, DE) presented his draft report on the MiCA proposal. While considering the Commission proposal to be a good basis to work on, Berger discussed a number of aspects for which he proposes amendments. This includes the question regarding the supervision of significant crypto-assets and asset-referenced tokens, for which Berger considers the European Central Bank (ECB) as the proper supervising authority. Taking a “same risks, same rules” approach, Berger also considers it important that crypto-assets should fall under the same rules as more traditional financial instruments, especially in the context of anti-money laundering (AML) and counter-terrorist financing (CTF) requirements. On the overall scope of MiCA, Berger wants to have a clearer definition of when a certain instrument is considered to be an asset under MiCA and when it falls under the notion of financial instrument, for which the Markets in Financial instruments Directive II (2014/65/EU) (MiFID II) is applicable.
In general, the shadow rapporteurs from the other parties in the ECON Committee share the views of rapporteur Berger. Eero Heinaluoma (Socialists and Democrats (S&D), FI) supported Berger in envisaging an important supervisory role for the ECB, but also warned that this might create legal difficulties. In addition, Heinaluoma argued that the MiCA framework must support innovation while preserving strong investor protection requirements and financial stability. Ondrej Kovarik (RE, CZ) welcomed the rapporteur’s stricter approach on significant asset-referenced tokens and e-money tokens and repeated that a closer look should be taken on the scope and definitions of the MiCA proposal to provide more clarity and consistency. During his turn, Antonio Maria Rinaldi (Identity and Democracy (ID), IT) asked for more coordination at the global level, to avoid market fragmentation due to different legal frameworks. Stasys Jakeliunas (Greens, LT) called for supervision at EU level only to avoid supervisory fragmentation.
The shadow rapporteurs and other members of the ECON Committee have until 31 May 2021 to suggest amendments to the MiCA proposal. A vote on the proposed amendments is envisaged before the summer recess.
- Proposal for a Regulation on Digital Operational Resilience for Financial Services
Rapporteur Billy Kelleher (RE, IE) presented his draft report on the DORA proposal. While discussing his proposed amendments to the Commission text, Kelleher stated that his report was to a certain extent influenced by earlier discussions held by the shadow rapporteurs. On the content of the report, Kelleher based his proposed amendments on three main principles: proportionality, competitiveness and future proofing. With this, the rapporteur means that he wants to ensure interference based on risks, ensure that the DORA regime does not prevent the EU from being open for business and investment and to ensure that the DORA framework can adapt to innovation easily. Kelleher also discussed outsourcing, emphasising that the regulation of ICT companies exercising functions for financial institutions should ensure the integrity of the financial markets. Critical third-party service providers from third countries should establish a legal entity in the EU.
The shadow rapporteurs generally supported the Kelleher draft report. Frances Fitzgerald (EPP, IE) emphasised that a proportionate operational resilience framework is key. In addition, Fitzgerald stated that ICT incident reporting requirements under DORA should be aligned with other regulation, such as the Payment Services Directive ((EU) 2015/2366) (PSD II) and the Directive on security of network and information systems ((EU 2016/1148) (NIS Directive). Jose Gusmao (The Left, PT) agreed with Fitzgerald on this point. Alfred Sant (S&D, MT) gave its support for the points raised by the European Supervisory Authorities in their February letter, which discussed possible difficulties in the Commission proposal with regard to the oversight framework. Bogdan Rzonca (ECR, PL) saw a very important in risk management, but argued that the reporting requirements under DORA should be proportionate and have added value.
The shadow rapporteurs and other members of the ECON Committee have until 26 May 2021 to submit amendments to the DORA proposal. A vote on the proposed amendments is envisaged before the summer recess.
- Proposal for a Regulation establishing a pilot regime for market infrastructures based on distributed ledger technology
Rapporteur Johan van Overtveldt (ECR, BE) presented his draft report on the pilot regime for market infrastructures based on distributed ledger technology (DLT). The amendments to the Commission proposal are based on three pillars:
- Scope: Van Overtveldt proposes to keep the aggregate threshold but lowers the proposed the maximum market capitalisation of the issuer of DLT transferable securities from EUR 500 million to less than EURO 50 million for both shares and bonds. Furthermore, sovereign bonds and exchange-traded funds should be admitted to trading or to be recorded on a distributed ledger.
- Level playing field: the rapporteur proposes to ensure that a DLT Multilateral Trading Facility (MTF) doing settlement services must follow the same requirements as a DLT Securities Settlement System (DLT SSS), and vice versa, and proposes to create a new type of market infrastructure, a ”DLT Trading and Settlement System” for operators wishing to combine both trading and post-trading roles.
- Early exit assessment: While the Commission has proposed that the DLT pilot regime should be in place for five years before it is evaluated, Van Overtveldt proposed to include a second review moment after three years following the start of the pilot regime.
The shadow rapporteurs on the DLT pilot regime proposal are overall supportive of the draft report. Jessica Polfjard (EPP, SE) stated that her view is in line of that of the rapporteur with regard to the technology neutral wording of the report and the proposed expanded scope of admitted securities. Eva Kaili (S&D, GR) supports the aim of the pilot regime, which is to test innovative business models, but asks for a discussion on whether the proposal is not too narrowly defined to create equal chances for established market infrastructures and newcomers in the market. This point is supported by Stephanie Yon-Courtin (RE, FR), who also supports the introduction of a DLT SSS but is more in favour of the thresholds in the original Commission proposal. While largely in favour of the amendments proposed in the draft report, Stasys Jakeliunas (Greens, LT) misses a clear exit strategy in case the pilot does not go as planned and prefers a supervisory regime at EU level instead of at national level to prevent market fragmentation. Finally, Chris Macmanus (The Left, IE) does not support the inclusion of sovereign bonds among the scope of admitted instruments.
The deadline to submit amendments to the proposal is 20 May 2021, but Van Overtveldt stated that he agrees with a possible pushback of that deadline. Like with the other proposals discussed above, the ECON Committee intends to vote on the legislative report before the summer recess.