Working Paper: Strategic Foresight in Digital Finance

Since 2020, the European Commission has elaborated Strategic Foresight Reports. In these Reports they highlighted six major megatrends.

We identified three key challenges that are not only essential for the EU’s future but also for the stability of its banking and digital finance sectors. By leveraging digital finance, these challenges can be addressed, paving the way for a more resilient economic landscape.

What is Strategic Foresight?

Strategic Foresight is a method used to explore diverse potential futures. Unlike forecasting, it focuses on anticipating trends and risks to inform policymaking. For the European Commission, this tool is crucial for enhancing the EU's resilience and competitiveness in an interconnected world. By using techniques such as horizon scanning, scenario planning, and stakeholder engagement, the Commission seeks to develop strategies that ensure sustainable growth and innovation.

Key Challenges Impacting the Digital Economy:

Geopolitical Shifts & Globalization Reshaping: Rising geopolitical tensions and changing trade dynamics disrupt supply chains and regulatory environments, challenging the banking sector and Europe’s financial autonomy. To remain competitive, Europe must adapt its financial systems to the demands of a connected and rapidly changing global environment.
Technological Transformation: The adoption of digital technologies like AI and blockchain enhances efficiency but introduces cyber risks and competition from FinTech, demanding stronger regulation to ensure stability.
Sustainability Funding: Addressing climate change requires major investment, with digital finance (e.g., blockchain, IoT) crucial for transparency and funding in support of the EU’s green goals.

Strategies for Digital Finance Integration:

Awareness and Education: A collaborative public-private approach is necessary to enhance digital financial literacy across the EU.
Understanding: Initiatives such as the “Transatlantic Business Initiative” and “Tokenise Europe 2025” promote cross-border cooperation and understanding of digital finance’s strategic value.
Adapting: Fostering a level playing field for innovation by encouraging state-led standards to drive interoperability and collaboration.
Protecting: Initiatives like the Cyber Solidarity Act are crucial for safeguarding the digital financial infrastructure, while maintaining open regulatory processes ensures continuous innovation.