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What if navigating complex EU regulations was as intuitive as using your favourite app? While it might sound futuristic, it is precisely what Europe needs.
A range of regulatory technology (RegTech) solutions already help businesses automate routine reporting obligations, reduce legal overheads, and anticipate regulatory developments. For instance, digital tools are increasingly used to analyse legislation, map business obligations, and identify inconsistencies, enabling regulators to proactively streamline requirements and respond to emerging risks. Importantly, all this is done without undermining the integrity of the EU rules themselves.
Born in the 2010s amid post-crisis reforms and digital acceleration in finance, RegTech matured quickly in the financial sector. Faced with mounting compliance demands, financial institutions turned to technology to navigate a complex, cross-border regulatory environment. This gave rise to a thriving market of compliance solutions in Europe, driven by data-heavy reporting requirements. Today, compliance technologies support everything from fraud detection and automated audits to supervisory tools used by regulators themselves.
Now, as the broader innovation economy runs on data, artificial intelligence and cloud infrastructure, the need for RegTech’s transformative potential extends far beyond the finance sector.
Regulatory technologies could shift valuable resources from burdensome compliance toward economic success.
From red tape to smarter regulation
The second term of the von der Leyen Commission kicked off with ambitious targets: reducing reporting requirements by at least 25% (and 35% for SMEs) and introducing five legislative simplification packages to promote investment and innovation.
Thus far, this effort has focused on streamlining duplicative reporting obligations, such as those found in GDPR, cybersecurity, and financial regulations, as well as critically reviewing legislation before it advances. The withdrawal of the AI Liability Directive and e-Privacy Regulation are early examples of this rethink.
The Draghi report rightly identifies the regulatory burden as a major drag on investment, with over 60% of EU businesses citing regulation as an obstacle. However, repealing regulations alone will not solve this challenge. We need smarter, not just fewer, rules along with more intelligent ways of engaging with them.
Embedding tech-enabled compliance across sectors
By embedding compliance tools into the European school of regulation – which is rooted in legal certainty, market harmonisation and fundamental rights – we can enable a dynamic shift that the European economy needs. We can move from burden reduction through the various proposed omnibus packages to a more proactive approach of equipping both businesses and regulators with the tools to navigate and apply common European rules more effectively.
First, we need to actively support European RegTech innovators. The nascent market requires targeted support through incubation, funding, and acceleration programs specifically tailored for compliance automation, reporting tools and governance solutions.
Trust-building mechanisms such as EU-level accreditation schemes for vetted compliance tools and collaborative testing environments can help novel solutions to gain visibility and credibility, especially in sensitive areas such as personal data or cybersecurity. Additionally, legislators should, for example during the impact assessment phase, consider where compliance tools could provide added value for both regulators and businesses.
Second, RegTech must be embedded into future regulations. This means designing regulatory frameworks that default to tech-enabled compliance. This is critical, especially in areas like AI, cybersecurity and ESG reporting, where complexity is high and requirements evolve rapidly. For example, technologies can support AI risk classification under the AI Act, automate incident reporting in cybersecurity, and streamline data collection for sustainability reporting under frameworks such as the Corporate Sustainability Reporting Directive.
By integrating RegTech into the legislative cycle from impact assessment to implementation guidance, we can move beyond treating RegTech as an afterthought and make it a core mechanism of modern governance.
Europe’s competitive edge is built on legal certainty
Simplification is an important measure on which we can now build. As recent global disruptions have shown, legal certainty and competitiveness are not mutually exclusive. Remove too much, too fast, and we risk eroding trust in the regulatory foundations of the European single market.
Regulation has long evolved alongside technology, from paper forms to PDFs to spreadsheets. RegTech is the next leap, leveraging AI, automation, and data integration to transform compliance into a competitive edge.
The choice is clear. Europe can wait for RegTech to grow in fragmented silos, or it can lead in shaping a world-class ecosystem that fosters innovation, safeguards fundamental rights and freedoms, and strengthens the single market. We did it before with fintech. Now we can (and must) do it again across every sector.
By embracing compliance technology as a central pillar of regulatory reform, the EU can build a dynamic, inclusive, and digitally savvy environment. The prize? A more resilient and globally competitive European economy.
Kristo Lehtonen is Director of International Programmes and Meeri Toivanen is Specialist at the Finnish Innovation Fund Sitra.
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