New ECB PISA Framework for Electronic Payment

EU – Finance

From 15 November 2022, the new payment instruments, schemes and arrangements framework ("PISA Framework") will apply to companies already subject to oversight by the European Central Bank ("ECB"). This will be accompanied by an exemption policy which will dictate to whom the new framework will apply. Unlike its predecessor, the Harmonised Oversight Approach and Oversight Standards for Payment Instruments ("Harmonised Approach"), the PISA Framework will apply to digital payment tokens. This new scope will apply after the initial grace period of one year.

Key date(s)

• 27 October-31 December 2020 – ECB opens a consultation on PISA Framework ("Consultation").
• 22 November 2021 – The ECB and Member State national central banks ("Eurosystem") publish the PISA Framework.
• 15 November 2022 – PISA framework starts to apply for payment schemes already subject to oversight by a Eurosystem central bank.

Status

• Following the Consultation in late 2020, the ECB published the PISA Framework in November 2021. It will be used to regulate firms facilitating the use of e-money transfers, digital payment tokens, and cryptoasset-related services. The Eurosystem will enforce this new framework, which comprises of the ECB and national central banks in Member States whose currency is the Euro. Firms which are subject to ECB oversight will need to comply with the PISA Framework from 15 November 2022. This will give them roughly a year to achieve compliance.For other companies not yet subject to ECB oversight, there will be a one-year grace period in which to comply. An exemption policy is currently under review and will set out the criteria for firms that will fall under the PISA Framework's scope. The policy uses a points-based system formulated off the following four criteria:
  • The size of the end user or payment service provider base;
  • The degree of market penetration in terms of volume;
  • The degree of market penetration in terms of value; and
  • Geographic relevance, e.g. the number of countries in which the scheme or arrangement is available.

 What it hopes to achieve 

• The PISA Framework will replace the Harmonised Approach for cards, direct debits, credit transfers and e-money. The new framework will clearly outline a set of oversight principles in a single document for electronic payment instruments, schemes and arrangements based on international standards and targets agreed in light of the Consultation. It aims to render electronic transfers safer and more efficient.
• With the cryptoasset market showing no signs of slowing down in growth, these new standards will marry the worlds of regulation for traditional and emerging digital transfers. The PISA Framework aims to future-proof the Eurosystem's approach to digital payment tokens.

Who does it impact? 

The PISA Framework will alter the principles which are used to regulate electronic transfers. It will affect instruments, schemes and arrangements regardless of where the governance body is incorporated if either of the following criteria is present:

1. The transfer of value to or from end users within the euro area is enabled; or
2. The transfer of value is based on electronic payment instruments denominated, funded, backed or redeemable at least partly in euro.

The ECB and relevant national banks will be required to change their regulatory approaches to reflect these new principles. Crypto stakeholders may see a change in transfer procedures as a result. The PISA Framework will lay groundwork for closer monitoring of stablecoin exchanges, a control to which the crypto market has not yet been significantly exposed

Key points 

1. New Assessment Methodology

• • The PISA Framework provides an extensive assessment methodology. This methodology sets out applicable principles to guide the Eurosystem in its regulation of electronic payment schemes and arrangements. The aim of the new standards is to ensure that principles are applied consistently across governance bodies.

2. Inclusion of cryptoassets

• • The PISA Framework will regulate services which enable merchants to accept cryptoassets through card payments. It will also apply to the sending and receiving of cryproassets through e-wallets. This is reflected by the exemption policy to the new standards. This policy dictates which payment schemes and arrangements will fall under the regulatory standards of the PISA Framework. Cryptoassets clearly fall under the scope of the new principles.

3. Single Document of Standard

• • The new standards collate previous principles into one document and will hopefully harmonise regulation across the traditional financial market and cryptoasset transfers. The PISA Framework will act as one of the initial steps in future-proofing electronic transfer regulations and keeping up with the ever-evolving digital payment world.

This blog post provides an overview of a key recent or upcoming development in digital regulation in the UK or EU as part of our horizon scanning timeline which can be found below.

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