The lay of the land
The European Commission is moving towards regulatory simplification, with key focus areas likely to be the bloc’s competitiveness as a financial hub and its ESG directives, according to a panel of experts speaking at BNY Investments’ European Investment Conference 2025.
BNY international head of public policy and government affairs Ben Pott says the theme of Europe’s competitiveness on the global stage was tackled in the Draghi report, published in September 20241. Pott believes the sentiment of this report has filtered through to the new Commission’s Competitiveness Compass2 and the omnibus simplification agenda on ESG regulations3 which is reviewing certain directives.
Arash Dashtgard, a senior managing associate in the UK/EU financial services regulatory group at global law firm Sidley Austin, notes that, at the same time as ESG proposals being rolled back, the regulatory framework is continuing to deepen in novel areas such as digital assets and artificial intelligence (AI), noting the “comprehensive framework” for digital assets recently introduced under the Markets in Crypto Assets (MiCA) regulation. On AI, he adds that the EU has taken more of a hard law approach than other jurisdictions to date, with the AI Act - which is largely due to apply from 2026 - setting out the first comprehensive horizontal framework for AI regulation.
Unlocking private markets
Michael Horvath, partner and sustainability leader at PwC, believes the ongoing development of European Long Term Investment Funds (ELTIFs) is being supported by regulators with the aim of diverting more money into private assets.
“Most asset managers we work with say there needs to be three branches: UCITS, Alternative Investment Funds and a middle ground of ELTIFs,” he says. “I believe that is going to be one of the main topics for the next couple of years.”
Digital assets
Dashtgard notes MiCA is already having an impact, as seen in the delisting of certain stablecoins from crypto exchanges4. One question, he adds, is whether other jurisdictions will look to Europe’s approach and follow suit, effectively regulating digital assets markets on a similar basis to traditional securities markets – noting this appears to be the current direction of travel in the UK.
In setting out a framework on digital assets and stablecoins, Pott believes the EU has “done its homework” with MiCA. He suggests there could be more to come around tokenisation, however. Meanwhile, against a backdrop of US deregulation, Pott expects a divergence between the US and Europe on the path of regulation for central bank digital currencies.
ESG labelling
Pott thinks at a high level how the Commission moves forward on ESG labels remains a key question. Could it opt for a similar approach to the UK’s SDR regime? “On the UK side we are seeing difficulty in how to apply these labels, so it will be interesting to see how the EU decides to move ahead in implementing that kind of thing,” adds Pott.
Horvath says the real-world application of labelling throws up questions, problems and uncertainties. One conundrum is how to compare products, he says. “We don’t have a measure of what is sustainable performance. We know what financial performance is, but how we can make product and benchmark comparable to each other?”
As Europe continues to grapple with these questions, it is clear that creating simplicity within existing regimes is a complicated business.
