Explanatory Memorandum to COM(2020)596 - Amendment of Directives 2006/43/EC, 2009/65/EC, 2009/138/EU, 2011/61/EU, EU/2013/36, 2014/65/EU, (EU) 2015/2366 and EU/2016/2341

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dossier COM(2020)596 - Amendment of Directives 2006/43/EC, 2009/65/EC, 2009/138/EU, 2011/61/EU, EU/2013/36, 2014/65/EU, (EU) 2015/2366 and ...
source COM(2020)596 EN
date 24-09-2020
1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

This proposal is part of a package of measures to further enable and support the potential of digital finance in terms of innovation and competition while mitigating the risks. It is in line with the Commission priorities to make Europe fit for the digital age and to build a future-ready economy that works for the people. T he digital finance package includes a new Strategy on digital finance for the EU financial sector with the aim to ensure that the EU embraces the digital revolution and drives it with innovative European firms in the lead, making the benefits of digital finance available to European consumers and businesses. In addition to this proposal, the package also includes a proposal for a regulation on markets in crypto assets , a proposal for a regulation on a pilot regime for market infrastructures based on distributed ledger technology (DL T ) and a proposal for a regulation on digital operational resilience for

the financial sector4.

The reasons for, and objectives of, the two sets of legislative measures have been set out in the explanatory memoranda of the proposal for a regulation on a pilot regime for distributed ledger technology market infrastructures, proposal for a regulation on markets in crypto assets and proposal for a regulation on digital operational resilience, respectively, and apply here as well. The particular reasons for this proposal for a directive is that, in order to provide legal certainty as regards crypto assets and achieve the objectives of strengthening digital operational resilience, it is necessary to establish a temporary exemption for multilateral trading facilities and amend or clarify certain provisions in existing EU financial services directives.

• Consistency with existing provisions in the policy area

This proposal, similar to the proposals for regulation it accompanies, is part of a broader ongoing work at European and international level aimed at (i) strengthening the cy be rsec u rity in financial services and address broader operational risks, and (ii) providing a clear, proportionate and enabling EU legal framework for cry pto-asset service providers.

Consistency with other Union

with other Union policies

Communication from the Commission to the European Parliament, the European Council, the Council,

Contents

1.

the European Central Bank, the European Economic and Social Committee and the Committee of the


Regions on a Digital Finance Strategy for the EU, 23 September 2020, COM(2020)591.

2.

Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets


and amending Directive (EU) 2019/1937, COM(2020) 593.

3.

Proposal for a Regulation of the European Parliament and of the Council on a pilot regime for market


infrastructures based on distributed ledger technology, COM(2020) 594.

4.

Proposal for a Regulation of the European Parliament and of the Council for operational resilience on


the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No

600/2014 and (EU) No 909/2014, COM(2020)595.


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As stated by President von der Leyen in her Political Guidelines,5 and set-out in the

Communication ‘Shaping Europe’s digital future’,6 it is crucial for Europe to reap all the

benefits of the digital age and to strengthen its industry and innovation capacity, within safe and ethical boundaries.

As regards crypto assets, this proposal is closely linked with wider Commission policies on blockchain technology, as cry pto- assets, as the main application of blockchain technologies, are inextricably linked to the promotion of blockchain technology throughout Europe.

As regards operational resilience, the European strategy for data sets out four pillars - data protection, fundamental rights, safety and cybersecurity - as essential p re-re quisi tes for a society empowered by the use of data. A legislative framework strengthening the digital

operational resilience of the Union’s financial entities is consistent with these policy

objectives. The proposal would also support policies aimed at recovering from the coronavirus, as it would ensure that increased reliance on digital finance goes hand in hand with operational resilience. Both proposals also respond to calls from the CMU High-Level Forum to establish clear rules for the use of crypto asset (recommendation 7) and to put in place new rules on cyber resilience (recommendation 10).8

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

This proposal for a directive is based on Articles 53(1) and 114 of the TFEU.

• Subsidiarity (for n on - e x c lu sive competence)

See the explanatory memorandums of the proposals for regulation on m a rkets in crypto assets, temporary regime on DLT market i nf rastructures and digital operational resilience.

• Proportionality

See the explanatory memorandums of the proposals for regulation on m a rkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

Choice

of the instrument

This proposal for a directive accompanies the proposals for a regulation on markets in crypto assets; temporary regime on DLT market infrastructures; and digital operational resilience. Those regulations lay down the key rules governing (i) crypto service providers, (ii) the conditions governing the pilot regime for DLT market infrastructures; and (iii) the key rules governing ICT risk management, incident reporting, testing and oversight. To achieve the objectives set out in those regulations, it is also necessary to establish a temporary exemption

President Ursula Von Der Leyen, Political Guidelines for the next European Commission, 2019-2024, https://ec.europa.eu/commission/sites/beta-political/files/political-guidelines-next-commission_en.pdf. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Region, Shaping Europe’s Digital Future, COM(2020) 67 final.

High-Level forum on the Capital Markets Union (2020). “A new vision for Europe’s capital markets: final report,

https://ec.europa.eu/info/sites/info/files/business_economy_euro/growth_and_investment/documents/20 0610-cmu-high-level-forum-final-report_en.pdf.


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for multilateral trading facilities and to amend several Directives of the European Parliament and of the Council adopted on the basis of Articles 53(1) and 114 of the TFEU. This proposal for a Directive is therefore required to amend these Directives.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and digital operational resilience.

• Stakeholder consultations

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

• Collection and use of expertise

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

• Im pact assessment

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

• Regulatory fitness and simplification

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

• Fundamental rights

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

4. BUDGETARY IMPLICATIONS

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures and digital operational resilience.

5. OTHERELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

See the explanatory memorandums of the proposals for regulation on m arkets in crypto assets, temporary regime on DLT market i nf rastructures; and, digital operational resilience.

• Detailed explanation of the specific provisions of the proposal

5.

All Articles relate to and complement the proposal for a regulation on digital operational resilience. They amend the various operational risk or risk management requirements foreseen


in Directives 2006/43/EC, 2009/65/EC, 2009/138/EU, 2011/61/EU, EU/2013/36,

6.

2014/65/EU, (EU) 2015/2366 and EU/2016/2341 of the European Parliament and of the


Council, by introducing precise cross-references in those provisions and thus attain legal clarity. More specifically:

– Articles 2 to 4, 6 and 8 amend Directive 2009/65/EC on the coordination of laws,

regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)9, Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II),10 Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD),11 Directive 2014/56/EU on statutory audits of annual accounts and consolidated accounts,12 and Directive EU/2016/2341 on the activities and supervision of institutions for occupational retirement provision (IORPs),13 and with the purpose of introducing in each of those directives specific cross-references to Regulation (EU) 2021/xx [DORA] for these financial entities’ management of ICT systems and tools that should be done in accordance with the provisions of that Regulation.

– Article 5 amends the requirements in Directive 2013/36/EU (the Capital

Requirements Directive, CRD)14 on contingency and business continuity plans to include ICT business continuity and disaster recovery plans established in accordance with the provisions laid down in Regulation (EU) 2021/xx [DORA];

– Article 6 amends Directive 2014/65/EU on markets in financial instruments

(MIFID2) by adding cross-references to Regulation (EU) 2021/xx [DORA] and by amending provisions relating to continuity and regularity in the performance of investment services and activities, resilience and sufficient capacity of trading systems, effective business continuity arrangements and risk management;

– Article 7 amends Directive (EU) 2015/2366 on payment services in the internal

market (PSD2)15 and more precisely the authorisation rules by introducing a cross-reference to Regulation (EU) 2021/xx [DORA]. In addition, the incident notification rules in that Directive should exclude ICT-related incident notification that Regulation (EU) 2021/xx [DORA] fully harmonises;

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7.

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the


coordination of laws, regulations and administrative provisions relating to undertakings for collective

investment in transferable securities (OJ L 302, 17.11.2009, p. 32).

8.

Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the


taking-up and pursuit of the business of Insurance and Reinsurance (OJ L 335, 17.12.2009, p.

1).

9.

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative


Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations

(EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p.

1).

10.

Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 amending


Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts (OJ L 158,

27.5.2014, p. 196).

11.

Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the


activities and supervision of institutions for occupational retirement provision (OJ L 354, 23.12.2016, p.

37).

12.

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the


activity of credit institutions and the prudential supervision of credit institutions and investment firms,

amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176,

27.6.2013, p. 338).

13.

Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on


payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and

2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337,

23.12.2015, p. 35).

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10


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5

The first paragraph of Article 6 further contributes to clarifying the legal treatment of crypto assets qualifying as financial instruments. It does so by amending the definition of a ‘financial instrument’ in Directive 2014/65/EU on markets in financial instruments to clarify beyond any legal doubt that such instruments can be issued on a distributed ledger technology.

The fourth paragraph of Article 6 complements the proposal for a regulation on a pilot regime for distributed ledger technology market infrastructures by temporarily exempting distributed ledger technology market infrastructures from certain provisions in Directive 2014/65/EU in order enable them to develop solutions for the trading and settlement of transactions of crypto-assets that would qualify as financial instruments.