Regulatory framework and technological advancements: Creating a Cashless Europe of the Future

Journalist Kangkan Halder argues in this opinion piece that in order to maintain stability and promote innovation, European authorities must actively adapt regulations to address issues such as navigating the aftermath of the banking crisis, dealing with cryptoassets, and the impending digitalization of money and payments.

The events that took place in the first half of 2023 have brought attention to how important a strong regulatory environment is for the financial industry. Three small to medium-sized US banks as well as Credit Suisse, the second-largest bank in Switzerland, failed in March as a result of a transient financial crisis.

This catastrophe was an important wake-up call to the need of strong regulation and vigilant oversight.


While the short-lived fear had a substantial impact on the US and Switzerland, the euro area showed resilience due to the installation of strong controls like the Basel III system, which is applicable to all European banks.

It is important to understand that effective regulation on its own is not always adequate.

The European Banking Authority (EBA) under the European System of Financial Supervision (ESFS) exhibits proactive supervision, which supports the regulatory system by guaranteeing its execution. Additionally included in the ESFS are the European Insurance and Occupational Pensions Authority (Eiopa) for the insurance industry and the European Securities and Markets Authority (Esma) for the regulation of the securities industry.

Together, these organizations safeguard clients of financial services and promote trust in the financial system.


Risks within the financial industry, which goes beyond traditional banking, must be continuously monitored and assessed. In the cryptocurrency industry, there have been notable occurrences as a result of the introduction of digital cryptocurrencies, tokens, and stablecoins that operate without common standards and standardized legal frameworks.

As examples, consider the failure of companies like FTX, BlockFi, and Genesis, to mention a few, as well as incidents where hackers have stolen coins and tokens worth billions of euros. Further emphasizing the necessity for strong regulation in this developing industry are the continuing legal actions taken against Binance and CoinBase in the US.

Although the volatility in the cryptoasset market has so far had a little effect on the whole financial system, there may be increased risk due to interconnection, banks’ offering or purchasing of cryptoassets, as well as their involvement in any crypto-related activities.

The failure of FTX, which resulted in $8 billion worth of lost assets, also highlights the shortcomings of regulating single sub-entities in particular countries.

Conglomerates in the bitcoin industry must adhere to transparency requirements, which include creating consolidated financial statements. Understanding their general structure and interdependencies requires the exchange of information across national boundaries.

Even though Europe set the bar by implementing markets in cryptoasset (Mica) legislation, further development is still required.

Digital euro, payments, and services

With the rising acceptance of digital transactions in society, the concept of a digital euro has gained support.

This « digital banknote » would have properties comparable to actual currency, such as privacy, offline usage, legal tender status, and widespread acceptance across the eurozone.

Furthermore, it would create new opportunities and lower costs for e-commerce, peer-to-peer payments, and programmable transactions.

Members of the European Central Bank working on the viability of a digital euro anticipate its deployment within the next three to four years, potentially as early as 2027, if everything goes as planned.

Nevertheless, the introduction of a digital currency that is entirely tethered to parity with its paper equivalent will not only spur innovation in payment processes and services but also the development of private or collective lending activities.

It would be essential for disparate assets to work together seamlessly across the physical, digital, and, maybe, meta-worlds.

But new regulatory difficulties would also result from this.

Furthermore, it is still not obvious how restrictions on transporting a digital currency to non-euro countries, as is the case with prohibitions on real paper currency, might be implemented, even if it may be possible to set daily or monthly spending limits to comply with anti-money laundering procedures.

The future of European finance will be shaped by creative breakthroughs in the digitalization of money and payments as well as a strong regulatory framework that will seek to progressively move us toward a cashless and digital economy.

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