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Digital finance framework

Digital finance framework

Context

Digitalisation, which includes the use of technologies such as artificial intelligence (AI), distributed ledger technology (DLT), application programming interfaces (APIs), cloud computing and digital platforms to transform financial processes, is progressing across all activities of the financial value chain, from product design and distribution to order execution, and across all sectors of finance. Initially focused on improving operational efficiency and risk monitoring, digitalisation is increasingly used to enhance customer experience through more personalised and seamless interactions, support decision-making, and enable new products and services. It may also contribute to the further integration of financial markets in the EU.

Digitalisation also raises important challenges. These include risks of market fragmentation linked to diverging standards and fragmented platforms, the need for significant investment to modernise legacy IT systems, and a growing demand for specialised digital and data-related skills. It also introduces new risks, in particular related to cybersecurity, ICT outsourcing and concentration, the use of AI models, and the governance and sharing of data. The pace of technological change represents an additional challenge for both market participants and regulators.

Since 2020, the EU has been implementing a comprehensive digital finance framework to support the digital transformation of financial services. This includes the Digital Finance Package, comprising the DLT pilot regime, the Digital Operational Resilience Act (DORA), the Markets in Crypto-Assets Regulation (MiCA), as well as targeted adaptations of existing financial legislation to remove barriers to digital innovation. This framework is complemented by horizontal initiatives such as the EU data strategy, the AI Act and the proposed framework for open finance (FiDA).

Central banks are also playing a key role, notably through experiments and initiatives aimed at supporting the digitalisation of payments and capital markets, including work on wholesale and retail central bank digital currencies (CBDCs), tokenised settlement assets and DLT-based infrastructures.

Eurofi documents

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Regulatory Update

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Summary

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Views The Eurofi Magazine

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Key contributions

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