Lexia Avvocati is an independent law firm with extensive knowledge and experience in fintech, blockchain technology and Decentralized Finance (DeFi) dynamics. The firm supports Italian and foreign clients, such as banks, funds, exchange platforms, wallet providers and digital asset providers, in the launch and management of their operations in Italy and in dealing with the relevant regulatory authorities. Thanks to its multidisciplinary team, Lexia advises in relation to all issues affecting companies operating in the sector, starting from corporate, tax and regulatory issues to the fields of personal data protection, cybersecurity, intellectual property and consumer protection. We talked about it with Angelo Messore, partner at Lexia, and Francesco Dagnino, managing partner and founder.
One of the main challenges for fintech projects is the absence of a clear legal framework. Indeed, it is well known that technology develops faster than the law. But if the law does not provide a transparent environment for innovation, there cannot be a level playing field between innovative projects and market incumbents (or between domestic players and foreign competitors). An example can be seen in the recent EU regulation on crowdfunding, which Italy has not yet implemented. We know of several Italian crowdfunding platforms that are waiting for the Italian state to publish implementing regulations to become fully operational on a European scale. In these cases, the lack of a well-defined regulatory environment creates a clear competitive disadvantage for fintech companies.
European institutions are often criticized for their overly conservative approach to regulating fintech entities compared to other countries. Indeed, they try to strike a balance between consumer and investor protection on the one hand and openness to technology and financial innovation on the other hand – a task certainly not easy to accomplish.
In recent years, the EU has taken several steps to stimulate innovation in the financial market, notably through the Fintech Action Plan and the Digital Finance Package. In this context, a key role in shaping the rules for Fintech operators will be played by the recently approved EU regulation on the “pilot regime” for tokenized financial instruments and the EU regulation on cryptocurrency markets. Other initiatives that Fintech operators should keep an eye on include the ongoing review of the EU anti-money laundering framework, the entry into force of the EU regulation on crowdfunding, the proposed legislation to create a legal framework for the use of artificial intelligence, and the current discussion on the regulation of buy-now-pay-later (BNPL) services.
The crucial challenge we meet with our clients is to bridge the gap between the business idea they have and its implementation in accordance with the current regulatory framework. When working on Fintech projects, there are many technical, operational, business, financial, marketing, and legal issues. However, sometimes Fintech companies decide to postpone legal analysis by focusing on the other aspects of their project. In doing so, they underestimate the importance of the legal framework for defining their business model.
As legal advisors, we must first understand the innovative sector in which the client operates and its business model to design the best legal solution. Fintech companies operate in a highly regulated environment and must be aware of all the legal complexities of the sector in which they operate, as well as the opportunities that the regulatory framework offers them. We support founders in defining and structuring their business idea, considering all relevant legal constraints, and in approaching regulators to identify the appropriate legal framework for their project.
