European Union banking watchdogs have warned today that regulation is playing catch up with digital finance as social media platforms and ‘Big tech’ firms increasingly move into the space.
In a joint report from the EU’s banking, insurance and markets watchdogs, regulators said that the speed of innovation in financial services and blurring of the lines between financial and non-financial services had the potential to put users at risk.
“Digital finance has unlocked new synergies between financial and non-financial activities that potentially introduce systemic risk into the market for financial services,” the report said.
They warned that the blurring of the lines between financial platforms and social media was making it increasingly hard to categorise some services, with uncertainty rife in areas like data privacy and anti-money laundering safeguards.
The report called on the European Commission to take a “holistic” view of regulation financial services, just as the bloc consults on new regulation in the sector.
The report warned that new “supervision structures” may be needed to supervise the services provided by groups like Google, Meta and and Apple, whose products and services mix financial and non-financial services.
The case of failed German fintech firm Wirecard, which collapsed amid a major fraud scandal and investigation, exposed the difficulties of regulating groups that provide a range of different areas, the report said.