In Malta, the word ‘fintech’ is neither defined by law nor found in the jurisdiction’s primary legislation. Yet, local stakeholders on the island commonly limit the meaning of the word to blockchain-based finance.
In reality, at EU level (and to a certain extent, globally), fintech comprises all those banking and digital payment solutions which make use of the internet and other electronic means rather than using ink and paper. These include electronic money institutions, payment service providers, and banks using any form of mobile app or online banking website. Certain legal authors go to the academic extent of classifying online-investment-platforms and ‘InsurTech’ as also forming part of fintech’s umbrella definition.
In fact, the digital strategy1 of the EU Parliament (which was also adopted by the EU Commission) had outlined 19 points for its fintech plan which include “the promotion of innovative business models and the uptake of new technologies (e.g. artificial intelligence and cloud services), to increase cybersecurity and the integrity of the financial system, and to enhance further investor, consumer and data protection; and the introduction of regulatory sandboxes.” 2 In 2019, the EU Parliament had noted that as happens in any online service, fintech services raise issues of consumer laws and data protection laws which would leave citizens unprotected if fintech services are not properly regulated.
Whilst the introduction of MiCA by the EU in 2023 was lauded with a notable degree of hype, in practice, the EU legislator started introducing fintech legislation more than two decades ago. A few examples include:
- The Electronic Money Directive which is currently dated 2009 but was initially introduced back in 2000. This directive ensures that electronic money institutions (‘EMIs’) safeguard the money they receive in exchange for the electronic money they provide. The institutions making use of electronic money are not limited to traditional banks because EMIs can also issue electronic money.
- The Payment Services Directive which was originally introduced in 2007 as PSD1. Subsequently, it was replaced by PSD2 in 2015.
- More recently, Regulation (EU) 2020/1503 on European Crowdfunding Service Providers was promulgated.
In this series of briefings, we will share insights on current and proposed EU laws relating to fintech. Reference will also be made to the Maltese Regulator’s approach to supervise the conduct and prudential aspects of financial services which are offered electronically.