On 6 September 2024, the Department of Finance (“Department”) published a Public Consultation (“Consultation”) on the exercise of national discretions in the transposition of the European Single Access Portal Regulation (“ESAP”)  and associated texts.

The (ESAP) legislation consists of the following:

• ESAP Establishing Regulation (Regulation (EU) 2023/2859) ("Regulation");
• ESAP Omnibus amending Directive (Directive (EU) 2023/2864) ("Directive"); and
• ESAP Omnibus amending Regulation (Regulation (EU) 2023/2869.

The ESAP will offer a single access point for public financial and sustainability-related information about EU companies and EU investment products. The ESAP legislation is set to be transposed into Irish law by 10 July 2025 in respect of article 3 of the Directive and by 10 January 2026 for the remainder of the provisions. While the majority of the provisions of ESAP will be transposed on a fully harmonised basis, this being a technical transposition, there is one provision in the establishing regulations where Member States are given discretion as to its application. The Department is also seeking views in relation to other elements of the transposition, both of which are considered below.

Discretion 1 – Article 3(3) of the Regulation

Article 3(2) of the Regulation, being the Regulation establishing the ESAP, sets out that by 9 January 2030, each Member State must designate at least one body for the collection of information submitted on a voluntary basis and notify ESMA thereof. The Department has stated that it is currently considering what body or bodies to designate and accordingly would welcome views in this regard, by way of the Consultation. The options identified by the Department are as follows:

1. designate the Central Bank of Ireland (“Central Bank”) as the single national collection body for the collection of information submitted on a voluntary basis; or

2. designate different national collection bodies, to include at least the Central Bank and the Companies Registration Office for the collection of information submitted on a voluntary basis. Under this option, the Department would expect that an entity submitting voluntary information would submit to the body with whom it has a pre-existing regulatory relationship.

The Public consultation questions arising under Discretion 1 are as follows:

1. whether option 1 or 2 is preferred with such preference to be supported by the reasoning for either answer;

2. if option 2 is pursued, the Department is asking what body or bodies should be designated as a collection body for the collection of information submitted to ESAP on a voluntary basis. Again, the Department requests that  the reasoning for answers be outlined (with legislative references where appropriate).

Discretion 2 – Article 5(9) of the Regulation

Article 5(9) of the Regulation states that collection bodies shall ensure appropriate levels of authenticity, availability, integrity and non-repudiation of the information submitted by entities to be made accessible on the ESAP. For the purposes of ensuring those levels, Member States may permit the collection bodies to require that the information that is submitted by entities to be made accessible on the ESAP be accompanied by a qualified electronic seal.

The Department stated that it is currently considering whether or not to adopt the forgoing discretion and welcomes views as to whether or not it should be included in the transposing legislation. The Department has highlighted that if this discretion is adopted, the legislation would not require the use of a qualified electronic seal. The Consultation document explains what a qualified electronic seal is and sets out some of the advantages and disadvantages relating to such a seal. On consideration of the information set out in the Consultation document relating to qualified electronic seals, the following question is posed:

3. whether the transposing legislation should provide collection bodies with the possibility to require that information submitted by entities to be made accessible on ESAP be accompanied by a qualified electronic seal. As with the previous questions,  participating parties are asked to outline the reasoning for any answers, with legislative references where appropriate.

General Query

The fourth question arises under a “General Query – Matters considered relevant” heading and asks the following:

4. whether participating parties have any views on any other matters considered relevant to the ESAP transposition.

Next Steps

The Consultation period is open until 17:00 on Friday 1 November 2024. In responding to the Consultation participating parties may:

• give views on the specific questions set out in the Consultation. It is not necessary to answer every question, responding parties may choose to answer all of the questions or only those considered relevant;
• provide details of any issues or concerns that  should be considered in dealing with the particular topic being addressed in a response; and
• provide some analysis or views on the regulatory and / or financial impact of the proposed approach ,where appropriate.

The Department has stated that the comments received will be taken into consideration when deciding how best to transpose ESAP into Irish law.

On 16 September 2024, Anne Marie McKiernan, Director of Financial Operations at the Central Bank of Ireland (“Central Bank”) gave a speech entitled “The Journey to a Digital Euro” at an Irish Business and Employers Confederation digital euro event.

The purpose of the speech was to update the attendees as to the European Central Bank’s (“ECB”) and the Central Bank’s work regarding the possible introduction of a eurozone central bank digital currency – the digital euro.

Ms McKiernan outlined the impetus behind the exploration of the possible introduction of a digital euro, being to ensure that the currency remains fit for the digital age and cited its potential function in strengthening  the role of public money. She highlighted the importance of the need for a digital euro to be trustworthy and to add value to both consumers and businesses alike.

Ms McKiernan set out opportunities and challenges regarding the digital euro, including:

• fee structures for merchants will be less opaque as safeguards will be introduced, such as a service charge cap, to prevent unreasonable charges;
• merchants will have the ability to receive payments instantly, aiding cash flow;
• the further development of innovation in payment services will be fostered;
• how to provide for offline functionality where the digital euro could be used even without internet connectivity, is a challenging issue; and
• there are financial system and regulatory implications including ensuring that excess volumes of deposits do not flow from credit institutions to digital euro and cause undue liquidity issues.

On a domestic front, the speech also addressed the fact that Ireland lags behind its European counterparts when it comes to payments, specifically with regard to speed and choice, noting that Ireland no longer has an Irish card payment scheme, has higher than average processing fees and has a lack of instant payments.  Nonetheless, Ms McKiernan notes that payments have indeed evolved in Ireland and that the digital euro would serve to alleviate some of those issues mentioned as regards everyday retail payments and would also enhance the user experience.

Ms McKiernan stated that the goal of the Central Bank is to harness the benefits of innovations, while preserving monetary and financial stability but also ensuring that the financial system continues to operate in the best interests of consumers and the wider economy.

In setting out that the Eurosystem is almost one year into the two year preparation phase as regards the digital euro, Ms McKiernan highlighted the main objectives in this phase as:

1. To lay the foundations for the potential issuance of a digital euro and to be ready should a decision be taken to launch in the future. The key activities for this phase, as governed by the ECBs’ plan, include:

•  finalising the digital euro rulebook;
• defining rules and processes for the digital euro scheme;

• establishing framework agreements with potential service providers to develop, operate and maintain the digital euro platform and infrastructure.

 Further testing and experimenting to develop the digital euro is planned.

 2. The digital euro legislative proposal

The digital euro will be covered by a legislative framework, a draft of which was proposed by the European Commission in June 2023 and which is currently being debated at the EU Council and European Parliament. The legislation will grant legal tender status for the digital euro which will be on par with cash, requiring merchants to accept it as legal tender.

Ms McKiernan noted that a definitive timeline for the conclusion of these deliberations does not currently exist, despite this fact, the decision to issue a digital euro will  be considered by the ECB Governing Council only after the European Parliament and EU Council have adopted the digital euro legal act.

National Payment Strategy

Ms McKiernan also took the opportunity to provide an update on the work of the Department of Finance regarding the development of the national payments strategy for 2024 - 2030. This will set out the priorities that will help shape the future payment landscape in Ireland.

Next Steps

Ms McKiernan stated that in order to develop and potentially launch a digital form of public money, the Central Bank is broadening its engagement with the many stakeholders involved, such that valuable insights may be gathered and challenges addressed. Further, Ms McKiernan stated that over the next twelve months, the Central Bank will expand its structured engagements with industry with the aim of having a high level assessment of the preparedness of the Irish payments sector for its potential introduction, if a decision is made to launch the digital euro.

In October 2025, the Governing Council of the ECB will decide whether to move to the next stage of preparations, to pave the way for the possible future issuance and rollout of a digital euro.

On 12 September 2024,  the Department of the Taoiseach issued a press release detailing the matters considered and the action decided upon at a Competitiveness Summit (“Summit”) hosted by the Taoiseach on 2 September 2024.  The briefing is timely given that the topic of the competitiveness of the EU was discussed widely last week following the publication of Mario Draghi report. For more details please see the FIG Top 5 at 5 dated 12 September 2024.

The Summit considered the challenges facing Ireland as regards maintaining its competitiveness against a background of a changing international and European context. Specifically, the following matters were addressed:

• the importance of managing the factors under Ireland’s domestic control;
• the need to address infrastructural deficits;
• cost pressures; and
• the need to ensure a pro - enterprise economic environment.

Taking the forgoing into account, the Government has made a number of decisions, some of which include:

• that the competitiveness challenges facing Ireland, as discussed at the Summit, be prioritised by Government as part of the preparation of budget 2025;
• that important reforms relating to delivery of infrastructure / costs and delays in the legal system / financing the scale-up of Irish enterprise / maintaining Ireland’s attractiveness as a location for investment and regulation of the digital sector are progressed by the Government;
• the introduction of  an initiative to minimise the regulatory burden on SMEs including by rigorously applying the new SME Test across Government Departments, and by consulting with business to identify additional areas where the regulatory burden could be reduced;
• that additional resources be provided to the Competition and Consumer Protection Commission in order  to focus on identifying and removing barriers to competition in domestic markets; and
• that an annual summit will be held by the Government, with the National Competitiveness and Productivity Council, in advance of the budget each year.

Commenting on the Summit, the Taoiseach stated:

“The Government has now made a number of initial decisions to ensure that Ireland retains its competitiveness and reputation as a country in which business can prosper, ensuring continued strong job creation, growth and prosperity.”

Specifically referencing the Mario Draghi report, The Minister for Enterprise, Trade and Employment Peter Burke added:

“With the publication of the Draghi report, European competitiveness is now top of the EU agenda. We are ready to respond with these domestic policy developments today to maintain Ireland’s competitiveness.”

On 10 September 2024, the Central Bank of Ireland (“Central Bank”) published a frequently asked questions (“FAQ”) page in relation to Crypto Asser Service Provider (“CASP”) applications under the Regulation (EU) 2023/1114 Markets in Crypto Assets Regulation (“MICA”).

The FAQ page detailed the below information under the following FAQ  headings:

1. Authorisations

The Central Bank outlined that Virtual Asset Service Providers (“VASPs”) that are registered with the Central Bank are requested to engage with their supervisor to arrange a CASP early engagement meeting, with VASPs that are currently seeking registration encouraged to contact their Central Bank contact point.

In relation to timelines for a CASP application, the Central Bank did not give any definite timelines but stated that any timelines will be dependent on the specifics of each case, with best-prepared firms often proceeding more efficiently.

2. Expectations

The Central Bank stated that it is working with EU colleagues through supervisory coordination networks to build convergence around authorisation and supervisory expectations and processes.  The Central  Bank added that its expectations and processes have been developed based on the MiCA level 1 text and the supporting technical standards and guidelines that are currently nearing finalisation.

The Central Bank stated that VASPs seeking to become MiCA authorised CASPs, must go through the full application process and will be subject to a robust assessment to ensure it will meet both its obligations under MiCA and the Central Bank’s supervisory requirements.  However it should be noted that the Central Bank did state that where there is a pre-existing relationship between the regulated entity and the Central Bank, all supervisory knowledge will be taken into account as part of any authorisation assessment.

3. Policy

The Central Bank  stated that the simplified procedure under Article 143(6) of MiCA is only applicable when the following conditions are fulfilled: the entity was authorised to provide crypto-asset services under national law before 30 December 2024 and when a National Competent Authority (“NCA”) ensures that Chapters 2 and 3 of Title V of MiCA are complied with prior to granting any authorisation.  The Central Bank added that registration under the AML/CFT framework should not be considered as sufficient to qualify for the aforementioned simplified procedure.

The Central Bank noted a recent statement from the European Banking Authority, that outlines that firms listing stablecoins should ensure compliance as soon as possible and refrain from carrying out non-compliant services by 30 June 2024. The Central Bank stated that it expects that firms listing any stablecoins that are not compliant with MiCA to implement these actions as soon as possible and such firms should aim to complete this work by year-end 2024.

The Central Bank did not comment on its position in relation to CASPs utilising trading and execution venues in non-EU jurisdictions.  However it did ask the reader to refer to a recent ESMA Opinion on this point. For more details please see the FIG Top 5 at 5 dated 8 August 2024.

The Central Bank noted that a CASP may provide crypto-asset services on a cross-border basis, subject to a CASP submitting the specified information in the FAQ document to its NCA.

4. VASPS

The Central Bank explained that its reasoning for advising all new VASP applicants to seek CASP authorisation was due to the timelines involved in applications for VASP licenses and the fact that any applicant firm that is not registered and operating as a VASP by 30 December 2024 cannot avail of the transitional arrangements under MiCA and will not be permitted to operate as a CASP until authorisation has been granted via the CASP authorisation process.

In relation to VASPs which are not seeking a MiCA licence, the Central Bank stated that they will not have any passporting rights under the Irish VASP regime to provide their services in other jurisdictions and that any VASP not intending to apply for a MiCA authorisation should establish clear wind-down plans and make arrangements to cease providing services by the end of the transitional period adopted by the Department of Finance.

For more information please see our dedicated Insight on the Matheson website.

On 10 September 2024, the three European Supervisory Authorities (“ESAs”) published their Autumn Joint Committee Report (“Report”) on risks and vulnerabilities in the EU financial system.

The Report acknowledges the current highly uncertain environment, in terms of ongoing and recent geopolitical events which continue to present material financial stability and operational risks,  necessitating vigilance from all financial market participants.

The Report sets out an overview of the risks in the financial system and comprehensively considers credit risk from a cross sectoral perspective.  Against this background, the Joint Committee of the ESAs has advised that the supervisory authorities themselves, national competent authorities, financial institutions and market participants to take the following actions:

• Financial institutions and supervisors should remain prepared for facing the impacts of continued high interest rates on the real economy as higher re-financing costs continue to challenge the real economy and the financial markets. The ESAs note that, in this regard, firms that are highly indebted and those with weak cashflows are particularly vulnerable;
• Credit risk should continue to be monitored and carefully managed as its potential crystallisation remains a concern. Such monitoring should include ensuring that there are adequate provisioning levels and forward-looking provisioning policies. The Report also emphasises the importance of prudent and up-to-date collateral valuations;
• Due to ongoing deep uncertainties and recent increases in asset valuations, the Report stresses that financial institutions need to be flexible and agile and have proper plans and processes in place to address unexpected short-term multi-fold challenges. Specific mention is given to sudden changes arising from geopolitical risks;
• Financial institutions and supervisors are advised to remain vigilant regarding the impact of inflation on product development. The insurance sector is specifically referenced here and the Report highlights how premia repricing can negatively affect businesses if not done in a timely way and paired with claims inflation. Financial institutions and supervisors are also advised to ensure that consumers are aware of the effects of inflation on real returns, not only in the context of insurance, but also for savings and investments generally, with particular regard advised in respect of institutions for occupational retirement provision; and
• The Report advises financial institutions and supervisors to remain vigilant in respect of operational and financial stability risks that could arise from cyber-risks, noting the increase in frequency and the growing sophistication of same. The Report references the Digital Operations and Resilience Act in this regard and states that entities operating in the financial sector and their supervisors should address cyber risks more holistically, leveraging on risk management, incident reporting, threat led penetration testing and supervisory cooperation. Vigilance as regards challenges related to artificial intelligence is also advised.