Asymmetries Slowing Down Innovation
By using online platforms for an ideally direct match between the supply and demand of funds, digital financing redefines traditional credit relationships between loan applicants and financial intermediaries, reducing the role of banks. A different source of disintermediation comes from lending-based crowdfunding, invoice trading and crypto lending, which all make financing more flexible, efficient and accessible, and throughout the EU form the basis for the consolidation of lending platforms operating on the basis of various business models. Due to divergent national regulations, the activity of lending platforms is subject to rules that are anything but uniform in the different EU countries. The most recent EU legislation on the matter, despite having introduced a harmonized regulatory framework for digital financing, is not all-encompassing and has therefore not overridden, depending on the business model actually adopted, the need to follow provisions dictated by national regulatory frameworks, which are very heterogeneous, so that regulatory arbitrage within the Union remains possible and a true level-playing field for all EU financial operators has not yet been achieved.
The uncertainties arising from the absence of unified EU regulation are particularly evident in the case of crowdlending, in the consumer segment, and crypto lending, in the business segment.
Crowdlending collectively finances personal or entrepreneurial projects through matching portals, with the obligation of reimbursement and payment of interest by the recipient of the funds: financing decisions and financial risks are decentralized, as the platform performs a mere function of intermediation for the loan without shouldering credit risk. The EU Regulation 2020/1503 on European Crowdfunding Service Providers (ECSPs), which subjects the provider to authorization and supervision, prudential requirements, organizational and operational obligations, conduct and information obligations, and which provides for the protection of the project’s funders, however, applies only to business lending. Thus in Italy consumer lending remains subject to the fragmented and unstructured provisions on non-banking savings collection (Bank of Italy, Regulation 584/2016) which, in order to prevent the manager or users of the platform from exceeding the legal reserves provided for banks and other financial intermediaries (collection of savings from the public and granting of loans), dictates criteria for customizing negotiations between lenders and borrowers, and for using separate payment accounts on the basis of the authorization to provide payment services. This is poorly functional for the activity and in any case unsatisfactory because it leaves uncovered, in terms of user protection, other profiles characterizing the service, from the assessment of the creditworthiness of borrowers and the degree of risk propensity of lenders, to information on loan risks and consequences for non-compliance.
And the ECSP regulation is not sufficient to fully cover even business lending. Some services that are in practice connected to mere intermediation, such as scoring, fund custody, flow management, are in fact not covered by the regulation, so that the relevant national legislation still applies to them. Even more unsatisfactory is the status quo regarding crypto lending, which uses cryptocurrencies as an object (against interest) or as collateral for loans (in fiat currency or other cryptocurrencies), and today is mainly carried out by centralized platforms (CeFi). The problems of giving a legal framework to crypto lending are considerable, and are not resolved either by the ECSP regulation, from which crypto lending is completely excluded because cryptocurrencies do not integrate the relevant legal notion of lending, or by EU Regulation 2023/1114 relating to markets for cryptoassets (MiCA), as crypto lending cannot be traced back to any of the cryptoasset services contemplated therein and whose undertaking presupposes prior authorization. The fact that some crypto lenders are in any case destined to be subjected to the MiCA regime — and this, by virtue of their provision of additional, functional or complementary services to lending, thus integrating one of the services for cryptoassets subject to regulation (e.g. operating a cryptocurrency trading platform) — is nothing but an incidental response to the unresolved problem of the absence of specific and adequate regulation of crypto lending.
