Regulatory Lag, Regulatory Friction and Regulatory Transition as FinTech Disenablers: Calibrating an EU Response to the Regulatory Sandbox Phenomenon

33 Pages Posted: 23 Sep 2021

Date Written: September 22, 2021

Abstract

With transformative evolution involving crypto-assets, machine learning applications and data-driven finance models, complex regulatory and policy issues are emerging. Inadequate frameworks in FinTech markets create regulatory friction and regulatory fragmentation. These limitations continue to feature when piecemeal regulatory transition occurs. The danger of EU Member States being left behind in the FinTech innovation race if the regulatory landscape is cumbersome or incomplete for new business models is real. Regulatory lag and regulatory friction also act as a ‘disenabler’ for ease of cross-border FinTech trade in the EU. This article critically engages with the manner in which the regulatory sandbox has rapidly gained critical mass in Member States as a valuable adaptive measure supporting a route to market for FinTech entrepreneurs. Against the backdrop of the European Commission’s Digital Finance Strategy, the article further advances scholarship on FinTech in the EU by probing the EU’s resulting regulatory dilemma, undertaking a systematic evaluation of the continuum of complex policy options available to the European Union in response to the spreading regulatory sandbox phenomenon.

Keywords: FinTech, Regulatory sandbox, EU financial services law, Digital Finance, Initial Coin Offerings, Crypto-assets, Crowdfunding

JEL Classification: G20, G21, G22, G23, G28, K20, K22

Suggested Citation

Ahern, Deirdre M., Regulatory Lag, Regulatory Friction and Regulatory Transition as FinTech Disenablers: Calibrating an EU Response to the Regulatory Sandbox Phenomenon (September 22, 2021). European Banking Institute Working Paper Series 2021 - no. 102 , Available at SSRN: https://ssrn.com/abstract=3928615 or http://dx.doi.org/10.2139/ssrn.3928615

Deirdre M. Ahern (Contact Author)

Trinity College Dublin ( email )

2-3 College Green
Dublin, Leinster D2
Ireland

HOME PAGE: http://www.tcd.ie

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