EU savings union needs technology and trust, says CySEC vice chair

Europe must dismantle structural barriers and leverage cutting-edge technology to fully realise the potential of the Savings and Investment Union (SIU), according to Cyprus Securities and Exchange Commission (CySEC) Vice Chairman Panikkos Vakkou.

In an article originally featured in Eurofi magazine, Vakkou stated that for the SIU to successfully offer EU citizens broader access to capital markets and redirect savings into productive cross-border investments, the bloc must be honest about the factors currently hindering progress.

He clarified that the issue is not a lack of capital, but rather a financial system that is too difficult to navigate across borders, characterized by market fragmentation, high distribution costs, uneven product access, and compliance burdens that discourage international business.

The Vice Chairman emphasised that technology and crypto-related innovation—including digital platforms, tokenisation, distributed ledger technology (DLT), and artificial intelligence—are essential to addressing these systemic inefficiencies.

“This is where technology and crypto-related innovation can contribute to the objectives of the SIU,” Vakkou noted, adding that when used effectively, these tools can ensure saving and investing work smoothly in everyday practice while enhancing accessibility.

He argued that the global discourse should move away from a binary choice between regulation and innovation.

Instead, he suggested the focus should be on harnessing technological breakthroughs to achieve SIU goals by expanding market participation without eroding public trust.

The article highlights a persistent gap in the economy, noting that European households currently hold more than €10 trillion in low-yield bank deposits.

Vakkou observed that these households rarely access capital markets, echoing findings from the European Central Bank (ECB) regarding structural, cultural, and educational barriers that prevent capital from reaching the real economy.

He suggested that digital investment platforms could solve this challenge by making long-term products easier to compare across borders and supporting sound investment habits through diversification.

“In parallel, some of the biggest gains in driving investor protection and compliance can be achieved through RegTech systems,” Vakkou said, noting that CySEC uses such technology to analyse large data volumes and spot irregularities early.

Regarding market infrastructure, Vakkou underscored the importance of DLT in targeting areas where friction accumulates.

He explained that by enabling faster trading and settlement, DLT can streamline post-trade processes and lower operational costs while reducing human error.

However, he cautioned that innovation is not a panacea and may introduce new vulnerabilities, such as cyber-security risks, algorithmic bias, and potential systemic effects.

Vakkou also raised concerns regarding behavioural risks, particularly among younger, inexperienced investors who are often influenced by aggressive online marketing or social media messaging.

“While smartphones and mobile apps have widened access to markets, they have also made risk-taking easier, sometimes pushing investors towards speculative products with little protection,” he warned.

Consequently, he called for a total rejection of the gamification of long-term investing, demanding that companies provide full transparency regarding their incentives and revenue models.

He further insisted on the necessity of robust rules governing ownership and custody, ensuring that new systems meet high standards for digital operational resilience and integrate seamlessly with existing banking infrastructure.

Beyond technical rules, Vakkou maintained that strong consumer protection and the promotion of financial literacy remain non-negotiable pillars of the union.

Turning to the role of national competent authorities (NCAs), he argued that local supervisors are vital in balancing innovation with investor safety.

He further mentioned that NCAs must possess the specific resources and tools required to oversee entities utilising AI and tokenisation.

“As part of these efforts, CySEC operates a Regulatory Sandbox, which provides fintech start-ups and crypto service providers with a controlled environment to test their products under supervision,” Vakkou explained.

He added that this sandbox model facilitates better dialogue between regulators and innovators, allowing the commission to anticipate risks before new products hit the mass market.

Given the complexity of crypto regulation and cross-border finance, Vakkou stressed that these challenges cannot be solved in isolation and require intense international cooperation to share insights on fraud patterns and operational incidents.

“The next day of digitalisation will be defined by three elements: resilience, collaboration and inclusion,” he concluded, asserting that while technology can accelerate the SIU, it must be matched by proportionate safeguards.