Organisation Or Control Issues ? EU Regulators Query Blockchain For FinTech Platform

The EU’s regulators are querying the use of blockchain technology in the creation of a European Single Access Point (Esap). Esap will be a platform “for company financial and sustainable investment information”.

The sceptic in us asks whether the reasons for concern – as set out below in a report from our friends at Finextra – is really about organising the information, or simply an issue of control. Blockchain technology is fundamentally antithetical to central control – one of the reasons why the advent of Central bank Digital Currencies look more and more like a marketing play by the authorities…

The European Commission wants to create a single publicly-accessible platform to pool financial datasets as part of its goal to achieve a fully-fledged capital markets union.

Much of this information is currently stored in multiple formats and disparate databases scattered across member states. The Commission believes that this fragmentation stifles innovation and constitutes a competitive disadvantage for the EU capital markets in terms of attractiveness, compared to capital markets in other jurisdictions, such as the US.

The aim is to establish a single access point as well as an EU harmonised approach for the IT format for companies’ information.

The Commission is running a European Financial Transparency Gateway (EFTG) pilot project to assess the feasibility of using blockchain technology as the basis for a dedicated platform for sharing data.

In its response to the consultation, the European Securites and Markets Authority (Esma) has reminded the Commission that the pilot may be unworkable under General Data Protection rules if it supports the immutability of data stored on the blockchain.

“Esma understands the term ‘immutable’ to mean that the information stored in the Esap might not be deleted once uploaded in the blockchain,” states the regulatory body

“Esma encourages the Commission to consider the interaction between such feature and the rights of the data subject, in particular the right to rectification and the right to deletion in accordance with Article 16 and 17 of GDPR.

“Furthermore, information submitted in the company registers might be legally required to be deleted (e.g. after 10 years, in case of errors, etc). Whilst Esma does not hav ea view with regards to the technological solution which may be used to implement the Esap, and remains available to explore the potential of blockchain for the purpose of the Esap, Esma recommends that such questions are carefully considered by the European Commission.”

Esma chair Steven Maijoor stresses the body’s full support for the initiative, but cautions against setting unrealistic goals given the wide-ranging scope of the project.

“Esma is ready to take up a central role in setting up and running the Esap (and) supports an increased use of structured data formats whenever appropriate,” he says. “However, in light of the complexity of the project, Esma encourages the EC to carefully weight the scope of the Esap versus feasibility and operability.”

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £20 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.