First, the regulatory response that will enable the operating framework for finance and payments to adapt to the new challenges. Second, the adjustments that banks must make. Third, initiatives by the Banque de France to lead by example and support participants as they engage in the necessary transformations. 2.1 The regulatory responses to these challenges seek to ensure that risks are better controlled and to create a change-friendly framework [SLIDE 6]  For starters, let’s talk about the regulatory responses being initiated by lawmakers alongside regulatory and supervisory authorities. In terms of the digital transition, the regulations are intended to nurture innovation while ensuring that it is subject to the “same activities, same risks, same rules” principle. In the case of DeFi, this principle is applied via a square of guarantees designed to ensure equal security, compliance, responsibility and accessibility relative to the situation for traditional financial services. [SLIDE 6] Accordingly, the Banque de France supports the adoption of several key pieces of legislation that are currently being discussed by the European Parliament and the Council. First, the draft Digital Operational Resilience Act (DORA) is set to improve the financial sector’s digital operational resilience by harmonising the applicable requirements and by making certain critical IT services providers, including cloud services providers, subject to direct regulation. Second, in 2020, the European Commission presented a proposal for a Markets in Crypto-Assets (MiCA) regulation that we hope to see adopted during France’s presidency of the EU Council.
These two transformations present banks with a twofold challenge: on the one hand, they are exposed to and must protect themselves against the intrinsic risks associated with these developments; on the other, they have to act, because they have a role to play in these transitions, particularly on the financing side, with government backing. 1. The banking sector and the transition to a digital future and a sustainable economy Let us begin by diagnosing the situation. The banking sector is currently facing the twin challenges represented by the digital and green transition. These have the potential to weaken banks but also the wider financial system, and could ultimately impact the real economy. 1.1 Vulnerabilities in relation to the digital transition [SLIDE 2]  From blockchain and artificial intelligence to electronic payments, the cloud and big data, the growing digitalisation of banking and finance represents a multi-faceted evolution that is changing how banking has traditionally been done. We can pick out three broad shifts that characterise banking’s digital transformation and that are impacting the industry’s business model. First, customers have new expectations in terms of digital services. I am thinking here in particular of greater accessibility to tools to manage accounts remotely and obtain remote banking services, faster – even instant – payments, and more flexible customer relations. As the chart shows, more and more Europeans are using the internet for online banking, in a clear sign of how the sector is going digital [SLIDE 2].Customers also have new product needs.