Answer ... The French fintech industry seems to be doing well and does not seem to have been overly affected by the COVID-19 pandemic. During the first half of 2020, French fintech startups raised €455 million despite the pandemic, compared to €699 million for the full year 2019. In addition, fintech startups are supported by a network of dedicated incubators, business angels, venture capital funds and trade organisations. The government and the regulators also support financial innovation, although obtaining the necessary licences to provide regulated financial or payment services is not easier for startups.

The prominent trends of the last few years have been:

• digital assets (for which a dedicated regulatory framework was created by the PACTE Act in May 2019);
• open banking (which was boosted by the transposition of the Second Payment Services Directive); and
• neobanks (which are rapidly gaining market share, notably among freelancers, startups and young professionals).

The major anticipated development in the regulation of fintech is the preparation by the European Commission of a regulatory package dedicated to digital assets. Sources indicate that the first draft of this upcoming legislation will be published in Autumn 2020. We expect that this legislation will cover security tokens and will waive for these instruments certain requirements arising from other European directives or regulations, as the Financial Markets Authority suggested in its March 2020 consultation paper. Finally, we expect that this regulatory package will create a regime for stablecoins, whether it includes them in the definition of ‘electronic money’ or creates a tailormade framework for them.

Other anticipated developments include ongoing tests on central bank digital currencies carried out by the French Central Bank, for which intermediary results should be announced before the end of 2020.

Finally, a potential tightening of the regulation of outsourcing to cloud providers is expected in the next few years, since large financial institutions seem to rely too heavily on large US technology companies.