The challenges posed by FinTech to regulation are similar to those raised by financial innovation in general. The first is to identify those areas of the law dealing with each type of Fintech instrument or institution. The second challenge is to establish whether regulation should be incrementally adapted to the various types of FinTech focussing on their function, or radically reformed by enacting special regimes and/or introducing ad hoc exemptions for FinTechs. In this paper, I consider loan-based crowdfunding and investment-based crowdfunding as meaningful case studies and analyse their regulatory treatment in European jurisdictions, which may be found in different areas – banking, payments, securities or ad hoc regulation – depending on the country considered, the business model adopted, the attitude and relative power of financial supervisors. Moreover, I offer an example of functional approach to crowdfunding policy by suggesting ways in which the two main types of crowdfunding (equity-based and loan-based) could be regulated in Europe along the model of securities regulation. In principle, I shun a holistic attitude to FinTech, as well as claims for radical reform in this area such as those advanced by recent scholarship. I prefer a pragmatic approach to FinTech differentiating the services to which existing regulation can be adapted from those – such as electronic payments and mobile payments – that have attracted special reform promoting competition and transparency in the relevant fields. I consider the Payment Service Directives (PSD 1 and 2) as an example of this type of reform. I conclude that new provisions are often motivated by the need to enhance the protection of clients vis-à-vis FinTech institutions and tools. However, they are also aimed to reduce the transaction costs of services through technology and/or to promote financial innovation. The regulation of crowdfunding precisely shows the trade-offs between investor protection and financial innovation/economic growth, while PSD 1 and 2 offer examples of legislation which facilitates the disruption of traditional finance and promotes the competition between incumbent institutions and the new players, including large IT companies, telecoms and thousands of start-ups.
Cross-Border Banking and the SSM
In this article, I try to assess the likely impact of the Single Supervisory Mechanism (SSM) on cross-border banking in Europe. Firstly, I analyse the limits of the SSM, which is grounded on supervisory cooperation even though the ECB has powers of direction and substitution with respect to national supervisors. Indeed, the SSM represents a system of semi-strong centralisation, which may give rise to agency problems, particularly in the relationships with supervisors of non-euro area countries. Secondly, I examine the decoupling of supervision from regulation, which derives from the fact that the ECB lacks sufficient regulatory powers when acting as a supervisor of the Eurozone banking systems. The separation of regulation – which is harmonised at EU level – and supervision – which is centralised in the euro area – may create problems to the extent that the single supervisor cannot issue a prudential rulebook for the Eurozone but is subject to EU prudential regulation and national law provisions, often unduly limiting its supervisory discretion.