B R A T I S L A V A – November 16, 2021 – Representatives of the regulatory environment, national banks, ministries of finance and global innovative companies from 10 countries met at a three-day event on innovation in the financial world and the digital transformation of the banking world. Finweek Bratislava Conference brought a number of B2B meetings, combined theory with practice and answered several questions that can move the financial sector in Slovakia to a level that is also interesting for foreign companies and investors.
Bratislava has become a European financial center for a few days! From October 26 to 28, Bratislava hosted the Finweek conference, which was attended by several leaders and experts in the field of fintech, blockchain, crypto and insurtech. “Next year, we are preparing an even larger format with the participation of leaders from New York, Singapore and other leading countries. In addition, we are considering expanding our format for the first time with a gala evening”, says Davy Čajko, CEO of Future Proof, which organizes the Finweek conference.
The three-day conference was a great success among the participants and the public. The whole event was marked by constructive debates and, what is positive, several participating leaders perceive Slovakia as a country that has the potential to become a market of interest for innovative foreign investors and companies operating in this segment. However, if we want to become a leader, we need to make full use of the next 2 and a half years, which will decide the future of this skyrocketing area of the economy.
During the first day of the conference, discussions were held, which are really crucial from the point of view of the near future of Slovakia. Therefore, the organizers also paid special attention to this part. The result is a detailed elaboration enriched by the opinions of experts, which perfectly brings the specific issues closer to the general public.
Finweek Bratislava Conference was officially opened by Marcel Klimek, State Secretary, Ministry of Finance of the Slovak republic. Right at the beginning, he highlighted digitization and called it a major milestone on the road to recovery. According to him, all digital problems should be sustainable, while their stability should be based on 3 main pillars – economic, social and environmental.
The first day of the conference started with a discussion on CBDC / Stablecoins / Crypto regulations, during which several world leaders from the financial world were part of a discussion. The concept of the CBDC, or Central Bank Digital Currency, began to emerge with the arrival of digital currencies and cryptocurrencies. However, Marius Jurgilas, a member of the Board of the Bank of Lithuania, sees the CBDC not only as a response to the crypto, but also as a separate phenomenon. “Many of my central bank colleagues say that the CBDC can solve the overall problems, which countries are facing in different parts of the world. Therefore, for example, Southeast Asia is already at an advanced stage of its testing to replace physical money. Another example is the Caribbean, which is trying to solve the problem of financial inclusion, i.e. availability and equal opportunities for access to financial services, ” informs Jurgilas. Marcel Klimek also supports the introduction of CBDC, who considers it a good answer not only to the digital Chinese jüan.
According to Ľudovít Ódor, Deputy Governor of the National Bank of Slovakia, the CBDC should not be just a response to the need for a financial system that needs to adapt to new, digital conditions. We have to go deeper. “In my view, the CBDC should serve the public in particular. The role of national banks is therefore to provide stability and products that have a certain added value for the population. It can be, for example, privacy, which is a very important aspect for the population. The National Bank does not intend to sell user data as social networks do, ”points out Ódor.
As Ľudovít Ódor further informs, the fact is that cash is gradually disappearing and is in decline on a global scale. This is one of the reasons why there is a need for digital currencies, or rather a digital monetary system, which, however, Ódor proposes to introduce first for international payments. And although, according to Oldřich Dědek, Bank Board member, Czech National Bank, it does not look like the public is rushing to the CBDC, Martin Bruncko, Binance Executive Vice President Europe, is optimistic about the state of the CBDC in Europe. However, it calls for a clear regulatory framework for the whole cryptocurrency sector. It will be important to find the right balance and, according to Dědek, the whole situation will also need to be thought through.
According to Marcel Klimek, we already know that the loss of cash cannot be replaced by cryptocurrencies, which, according to Jurgilas, arose as a rebellion on the financial system. “Cryptocurrencies are not currencies, but rather assets or investments. And while in some cases we can use them without using real money to exchange goods or services, at the end of the day we should have a financial system that is not “fragile” and should provide guarantees. In addition, bitcoin is only a limited amount, so it cannot function as a universal currency, ”says Klimek. Martin Bruncko also agrees with the unsuitability of Bitcoin as a universal currency. “If we want to find money that is suitable for exchange, we need to find a medium whose value is stable. However, Bitcoin can fluctuate by 10% in one day, ” warns Bruncko. However, the situation is different when it comes to the digital Euro or other national currencies. Jurgilas points out that one of the tasks of all national banks, including the one he represents, is to oversee depreciation or conversely, overvaluation of the domestic currency. This is one of the reasons why the word regulation is often used in cryptocurrencies. Rok Žvelc, Legal Officer at DG FISMA, European Commission, pointed out that some crypto assets such as tokenised securities are already regulated by existing financial services legislation. As regards such crypto-assets, the Commission proposed a pilot regime for market infrastructures based on distributed ledger technology. However, most of the crypto assets are not covered by existing financial services legislation, although they may exhibit similar risks to traditional assets. To regulate those crypto-assets, the Commission proposed a Regulation on markets in crypto-assets.”says Rok Žvelc.
According to Klimek, therefore, the digital euro should be and will be developed, although according to Ódor, the CBDC should be understood as a supplement to cash and not as a substitute for it. According to Bruncko, our advantage is that, as part of the OECD, we have confidence in our central banks, which is not the case in all countries. An example is the countries of South America, where people do not trust the state or central banks, and therefore their confidence in the currency is likely to be very low.
Perhaps the most key discussion of the entire Finweek Bratislava Conference was the topic Incoming regulation of crypto assets, crypto assets and consumers, which, according to Martin Vojta, Deputy Executive Director of the Financial Regulation and International Cooperation Department, Czech National Bank, is associated with high risk in practice. And while some countries approach crypto assets as investment instruments, in Slovakia and the Czech Republic we perceive them physically, not digitally, so they are not subject to regulation. “It is in the EU’s interest to unify the approach to regulation. It should include 4 separate categories that need to be distinguished. These are stablocoins; emoney tokens and other, primary and user tokens, ” says Vojta. Daniel Ďuriač, FinTech Expert, National Bank of Slovakia, Financial Technology and Innovations Department |Payment Services and Innovations Section also sees importance in the regulation of crypto assets, which is not currently applied in Slovakia. Slavomír Fabišík, CEO & Founder of Stoke.finance, cites Germany as a positive example by which Slovakia can be inspired, where the regulation “security tokens” has been in force since June 2021.
However, Lukáš Steiniger, Crypto regulations consultant, sees Slovakia as one of the good examples of a country that is not over-regulated. According to Steiniger, excessive regulation kills a business, while adequate regulation can start a business, as evidenced by two new trades related to cryptocurrencies, which the National bank of Slovakia has adopted. The official requests of those who were interested in founding crypto exchange offices, funds or doing business in the crypto area were beginning to accumulate. “The crucial question, therefore, is whether we need to regulate this area, whether it is necessary to go as deep as MIKA and DLT, and whether it is necessary to incorporate the crypto in the same way as other financial market instruments,” says Steininger.
According to Vojta, the starting point is, what do we really want to achieve with regulation? “While we support the regulation of tokenized investment stocks, we must realize that transfer tokens, user tokens or bitcoins are not financial market instruments and should therefore not be subject to financial regulation. That is also why I support the narrowing of the MIKA proposal, ” says Vojta, but Daniel Ďuriač opposes him, according to which the National bank of Slovakia identifies with the current view of MIKA. However, Lukáš Steiniger has a completely different view of the situation. “The crypto came as an alternative to what the world is offering today. It has its advantages and killing them is the worst thing that can happen. Regulating something that has not yet been fundamentally resolved is a very bad approach, so instead of regulating I would take other approaches and wait for it to develop. We should regulate areas where it makes sense, but not those that work without us as well. Rather, be enlightened about the problem, educate and engage in other effective tools. Let us not comply with the European Union, which is over-regulating in order to protect the consumer. That is why we are killing a market that can bring us much more without regulation, ” Steiniger explains. Lukáš Kovanda, a Czech Economist, also agrees with his opinion and sees the importance of developing the crypto and its technological development as quickly as possible. “Lets nature take its course. I don’t think regulation is a good step and I’m worried about it, even though we’re discussing it, ” Kovanda admits.
Slavomír Fabišík sees importance in regulation also because it “sets borders”, so people know what they can and cannot do within the crypto area: “Personally, I do not like that the EU does not have a unified approach. If we have a common currency, we should also have common regulation. The current MIKA is a pretty good “beta version of the law,” but it still needs to be discussed by 2024. ” Daniel Ďuriač is of the opinion that the regulation should open the crypto asset market to the entire financial system and points to some positive and practical steps that MIKA includes: “For example, banks will be able to provide crypto asset services without applying for a license.” The question is, is that really enough?
Regarding the issue of regulation, Martin Vojta adds that the role of regulation is not to promote the market or contribute to its attractiveness. Rather, it is the role of the government, which can promote its policy in an international context and thus attract foreign investors. However, the benefits of regulation may be visible in other areas. “We think that regulation can contribute to market development, especially by removing legal uncertainty. In addition, the establishment of innovative hubs, one of which we also have within the National Bank of Slovakia, is also positive. Thanks to him, we also communicate with innovative companies and we have been preparing a sandbox for innovations since January, ” explains Ďuriač.
According to Steiniger, the tools that would really help make Slovakia an interesting market for foreigners are simple. “The advantage is the current unregulated crypto environment, which in combination with a relatively favorable tax environment has a very positive impact. If we add the available human resources and present the whole thing through appropriate marketing, we attract crypto projects that will bring a lot of funds to Slovakia. We have about 2 and a half years to use these conditions and attract those companies. If we make it before regulation comes, those companies that will be here at that time will not leave, they will just adapt to the new conditions, ” Steiniger concluded, whose opinion is in line with the goals of the newly formed FINAS association. “I am glad that the experts are embracing our vision, which began to take shape during the first Fintech conference we organized five years ago. I am sure that as a country we have the potential to become an interesting element for the whole region. I am pleased that our idea was adopted by the main players in the market, as is clearly shown by the constant growth of members of our newly formed association FINAS, which accelerates this whole environment, including the visibility of our country in the world, ” says Davy Čajko, President of FINAS | Fintech & Insurtech Association of Slovakia.
The first day ended with the topic of Fintech ecosystems in Europe, in which, according to Peter Pénzeš from the National Bank of Slovakia – Department of Financial Technologies and Innovations, private and public sector cooperation is the most important thing. “A good tango requires two dancers, and a well-tuned FinTech ecosystem requires cooperation between the public and private sectors. In addition, the private sector needs to be informed on time about the new rules and look for ways to integrate it into decision-making processes. Popular tools that make this possible are sandboxes and innovation hubs, which should be followed by the so-called instant payments. The National Bank of Slovakia is open to innovations that strengthen financial stability, bring added value to consumers and respect the rules of doing business in the financial market, ” says Pénzeš, and as a good example mentioned Innovation Hub, which enabled direct interaction with more than 70 companies. In addition, we are the 9th EU country to implement a sandbox early next year, from which we have high expectations. However, Martin Krendl, a representative of the FINAS Association, Attorney At Law at Prosman & Pavlovič Law Office, points out that the simplicity of these tools is essential, as well as the clarity of their use. “Creating a sandbox in Slovakia is a very good idea, because it will create new opportunities for new players. It is therefore better not to wait for the sandbox project being created by the European Commission, ” says Xavier Corman, Director at Fintech Belgium, Founder at My-Stand.com.
However, Shmuel Ben-Tovi, Israeli economist and president of the Fintech Community of Israel, points out that a very important element in building a fintech ecosystem is to build a community that will include not only fintech companies but also financial institutions, regulators, academics, consultants, investors and anyone interested in operating in the Fintech sector. “The Fintech community is important because it puts pressure on the government and regulators. Every good fintech startup needs an open dialogue and members who will discuss with state authorities and regulators. Sometimes this is the only necessary impetus for the state to start addressing the issues, ” explains Martin Peter, Head of the Banking Department, Ministry of Finance of the Slovak Republic.
The most important fintech regulator is the European Commission, which is currently dealing mainly with the assessment of crypto assets and the possibility of interconnecting national sandboxes. According to Pénzeš, this would bring significant benefits consisting in the possibility of testing innovative solutions not only in 1 country, but in several EU countries at the same time. However, Martin Peter points out that if we want to use the potential of regulation, we must have the same rules in Slovakia as the EU. However, according to Krendl, regulations need to be approached with caution, because too much regulation and strict rules are too counterproductive for innovation. “The European level is also important in the AML issue, which will make the fintech ecosystem more centralized and focused on preventing money laundering efforts,” says Martin Peter. At the same time, joining the EU opens up opportunities for us to cooperate with third countries. An example is Israel, which lacks a functioning sandbox due to a parliamentary crisis lasting almost 3 years. “Slovakia can be an entry point for Israeli companies that want to do business in the EU. In addition, Slovakia has a quality workforce and the costs are not so high, ” says Shmuel Ben-Tovi. The question is, will sandbox and open cooperation outside the EU help us to increase risk capital? “Sandbox can help us because companies will have the potential to become more attractive to investors, who will therefore be more willing to take risks,” explains Martin Peter. “However, the result will depend on the rules adopted when implementing the sandbox. If we complicate the opportunity for companies to test their ideas, we will discourage them from doing business, ” warns Martin Krendl.
But what awaits us if we really get to the level of cooperation between startups and financial organizations? Can we then accelerate innovation? “Banks are interested in innovating because innovations can be perceived as interesting by their clients. On the other hand, some new technologies may jeopardize their business model, which has been successful for years. I was part of a discussion between a representative of a traditional bank and a representative of a unicorn with a revenue in billions of euros. A representative of a unicorn said that traditional banks are doomed and can do nothing to save themselves, because their business model, infrastructure or overloaded workforce is something that will never change. In Israel, too, banks are doing what they can to adapt to innovations, but they feel threatened and it will be very interesting to see how they deal with digital banks, ” says Shmuel Ben-Tovi, although Martin Peter argues that the end of traditional banks will occur in 40 to 50 years, at the earliest, when there will only be a generation accustomed to non-face-to-face communication.
You can watch the first day of the Finweek Bratislava Conference as a video on our YouTube channel or you can listen to it as a podcast. In the coming days, we will also bring you the discussions of the next two conference days. So don’t forget to follow the social networks LinkedIn, Facebook and Instagram, and you can also join the LinkedIn Event. More on finweek.sk and Techevents.eu.
The Finweek Bratislava Conference was held under the auspices of the Embassy of Israel in Slovakia and in cooperation with the City TLV – The Fintech Community of Israel. We would like to thank to all our partners and supporters for helping us to organize the Finweek Bratislava conference:
- Main partners: Ministry of Finance of the Slovak republic, National bank of Slovakia, 365 bank, Binance
- Partners: VISA, Fumbi network
- Under the auspices of: Embassy of Israel in Slovakia
- Supporters: Oracle, Embassy of the Slovak republic in Washington
- Expert guarantee: FINAS – Fintech & Insurtech Association of Slovakia
- Production partner: VNET, Upcoming Tell your story
- In cooperation: City TLV – The Fintech Community of Israel
- Media partners: StartitUp, SITA, Nextech, Financial Report, Euroekonom.sk, Financie v pohode, in.ba, Bankovnictví, Education.sk, SmartMoneyMatch, Zlatá minca