Tue. Jan 19th, 2021

Planet Compliance

Innovation & Regulation in Finance

BaFinTech – German regulator’s FinTech event discusses innovation and regulation

3 min read

The timing could not haven been better. A week after the UK’s vote to leave the EU and the following discussion about the future of London as the world’s FinTech capital, the German financial watchdog BaFin today held an event on FinTech and regulation, the BaFin-Tech 2016.

The event consisted of four workshops, which aimed to create a discussion between startups and established financial institutions and the regulator on common legal and compliance aspects.

The topics of the workshops discussed were Crowdfunding and regulatory obligations, Alternative payment services and the EU Payment Servcies Directive (PSD2), Robo-Advice – Regulatory requirements for automated investment advice, and Blockchain technology and virtual currencies


Two panel discussions focussed on digitalisation and regulation as well as the relationship between FinTechs and traditional financial services providers.

Below we have summarised some of the key takeaways from the event:

Felix Hufeld, BaFin’s Chief Executive Director for Insurance Supervision, stated that the regulator had received 170 license requests from FinTech companies and about 100 inquiries a month on FinTech questions.

BaFin admitted difficulties the regulator faces when trying to apply existing regulation to the new cases created by FinTech companies and their products.

Hufeld praised FinTechs for increasing diversity in financial services, seemed to be reluctant in respect of the concept of regulatory sandboxes.

He also reminded FinTechs that though innovation is favourable, other interests such as security aspects, i.e. AML, Privacy, and consumer protection need to be strongly considered.

Hufeld, on more general aspects of financial services confirmed that European Supervisory Authorities located in London, i.e. EBA, need to be moved elsewhere.

He expects healthy competition from other financial hubs like Paris, Milan, Dublin and Amsterdam to challenge Frankfurt to become Europe’s financial centre. He also stated that in light of the Brexit vote, the question of the location in a potential merger between the LSE and Deutsche Börse would have to be reconsidered, throwing the future of the merger in doubt.

With regard to Blockchain, the workshop discussed Distributed Ledegr Technology based on securities trading and its implementation possibilities. Regulatory questions on blockchain technology focussed on AML, Data Protection, legal aspects such as enforcement and recission of contract, and Outsourcing. However, practical cases will determine which regulations are applicable.

With regard to payment services, it was confirmed that outsourcing under PSD 2 is possible. BaFin reiterated that he Regulatory Technical Standards that are due to be published in August 2016 are binding and shouldn’t be considered simple guidelines.


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