The whitepaper author and panel convenor, Dr Jane Thomason has stated,“We brought together global thought leaders to consider future challenges and built on it to produce a view of our world and its challenges, and the fresh new thinking and technologies that can enable us to build back better as we emerge from the Covid-19 pandemic. None of us represent anyone, and yet we've become influencers in this space. We are simply people who just have a belief that we can do something that can actually change things in this world”. 

Discussions by the panel included the rapidly emerging transformations occurring during the pandemic, including Central Bank Digital Currencies (CBDCs), health care, the future of SMEs, the global monetary system and global governance. Undoubtedly, these are transformations which have been accelerated at breakneck speed during the pandemic. The whitepaper urges a rethinking of the economic system, to rethink what we value, and to rethink how we live. Blockchain networks give new ways to design and build incentive systems enabling the capacity to rapidly build and implement large-scale structures for incentivising human behaviour. Can incentive systems be created which align the interest of the individual with the overall beneficial outcomes for the planet? 

• the need for legal certainty; 

• to support innovation;

• to ensure adequate investor protection;

• maintenance of financial stability.

It would appear that stable coins are very much on the EU’s agenda, presumably following the announcement, in June 2019, of Libra and the strong consortium of global organisations which were involved - not least of which was Facebook, with its 2.3 billion users globally.

Source: EU.eu

Together with this, the EU has also announced the Digital Finance Package that it is mindful that the EU needs to keep pace with an ever digitising environment; “If there was still any doubt it is now clear: digital finance has a lot to offer, and the people and businesses of Europe are ready for it. Europe must take full advantage of this in its recovery strategy to help repair the social and economic damage brought by the pandemic.  Digital technologies will be key for relaunching and modernising the European economy across sectors. It will move Europe forward as a global digital player”. 

The report went on to state its strategic objectives were to embrace digital finance for the good of consumers and businesses:

• Europe and its financial sector must embrace these trends and all the opportunities offered by the digital revolution;

• Europe must drive digital finance with strong European market players in the lead;

• The aim is to make the benefits of digital finance available to European consumers and businesses;

• Europe should promote digital finance based on European values and a sound regulation of risks.

It cited that, having consulted various parties, there was a general consensus of support due to:

• Digital finance has the potential to “unleash” innovation and create opportunities to develop better financial products for consumers including for people currently unable to access financial services. Furthermore, it offers the ability to unlock new ways of funding to EU businesses, in particular SMEs.

• Boosting digital finance would therefore support Europe’s economic recovery strategy and the broader economic transformation. It would open up new opportunities to support of the ‘Green Deal’; and the ‘New Industrial Strategy’ for Europe.

• As digital finance transcends borders, it also has the potential to enhance financial market integration thereby to potentially strengthening Europe’s Economic and Monetary Union.

• Finally, a strong and vibrant European digital financial sector could strengthen Europe’s ability to retain and reinforce its financial services and thus its ability  to regulate and supervise the financial sector to protect Europe’s financial stability and its values.

There was broad agreement to target 2024 as the date when it would be possible to have one license to cover all EU members, ensuring there were no national barriers to restrict access to EU citizens or to restrict those organisations looking to issue Digital Assets. Additionally, there was an acknowledgement of the efficiencies that Blockchain technology can bring to the financial services sector such as cutting the cost of payments, helping SMEs to raise capital while offering access to ‘real time’ financial information. 

In reference to firms looking to issue Digital Assets, three of the recommendations were, firstly, (as stated in 16) that small SMEs offering smaller issues would not need to produce a whitepaper/a prospectus. Secondly, see (19) there should not be the necessity for relevant  authorities in each jurisdiction to review any documentation prior to an issue being made available. Thirdly, (see 22) in order to ensure consumer protection, consumers should be offered a ‘cooling off’ period. The report has also suggested that issuers of tokens be required to keep investors regularly updated (see 31) on the progress of the organisation that had raised capital. One item of significance for those firms wishing to offer Digital Asset services is the need to have a legal entity based within the EU (see 50). This could have an impact for the UK post BREXIT. Furthermore, the EU Commission stated its support of the ECB, which is looking into the issuance of a retail central bank digital currency (CBDC) available to the general public.

The intention is for the legislation to be pan-European, therefore once a Digital Assets provider/issuer has been approved in one European country, they will be able to promote itself to all other members. However, this will not transpire quickly since each member needs to agree the terms of the proposal being tabled in this report, hence the 2024 suggested deadline for the introduction of these various proposals. Consequentially, in the short term we are likely to see other countries, in effect, ‘do their own thing’ by following France which, itself, has been quicker than other EU members with legislation to encourage Digital Assets/ICOs. Although German too have recently issue draft legislation, called, “eWpG-E”, to offer greater clarity around the issuance, transfer, custody and distribution initially of  Digital Assets backed by debt instruments. However, it is being proposed that regulators also wish to include equities and funds. Currently financial investments need to have a paper version of the proposition, but the aim is if issued in a digital format there would be no requirement for a paper version as well to be created. 

If these proposals are passed it will make Europe one of the most regulated jurisdictions for Crypto trading, offering legal clarity for the custody of Digital Assets and the obligations and rights between token issuers and buyers. This surely puts pressure on other jurisdictions to review their legislation and hence ensure they do not fall behind the competition to digitise their own financial services sectors.