This opinion piece by Tord Topsholm was originally published in Finextra: How the EU’s 28th regime could boost or stymie fintech growth in 2026.

January wasn’t as gloomy as usual for those in the European startup ecosystem, and we have Ursula von der Leyen to thank for that.

While Mark Carney arguably stole the show at Davos, warning that “middle powers” must unite because “if we’re not at the table, we’re on the menu”, it was von der Leyen’s comments that sparked enthusiasm and reenergised belief in the bloc among startup operators by addressing Europe’s regulatory fragmentation problem head-on.

“While on paper the market of 450 million Europeans is open, it is far more complicated in reality,” she said. “This acts as a handbrake on growth. We will soon put forward our 28th regime—we call it EU Inc.”

With those remarks, she proposed slashing the red tape that has kept the single market a dream and not a reality, a continent where entrepreneurs can scale across borders without getting bogged down in 27 different legal systems.

But as we await the European Commission’s legislative proposal in March, the question for the fintech sector remains: will this new regime actually simplify things, or will it just add a 28th layer of red tape?

For many, the concept of EU-Inc and its 28th Regime isn’t new.

EU-Inc began as a grassroots movement proposing a single, optional legal framework that exists alongside national laws. Under it, entrepreneurs could register a company fully online in any member state within 48 hours, and gain automatic recognition across all 27 member states.

The rationale behind this proposal was to address Europe’s competitiveness problem, as famously highlighted by Mario Draghi’s 2024 report, which warned that Europe was entering a “slow agony” of economic decline. Draghi’s diagnosis was blunt: European startups are born in a “regulatory cage”.

A fintech founder in Berlin looking to scale into Paris and Madrid today must navigate three different sets of corporate laws, three different tax administrations, and three different insolvency regimes. Contrast this with a founder in California and Guangdong, who can scale to a billion-dollar valuation across a massive, uniform market, while their European counterpart is still filling out paperwork for their second country. Hardly a recipe conducive to our growth and ambitions to compete on the global stage.

This regulatory friction helps explain Europe’s late-stage capital problem. A report from the European Investment Bank Group suggests European scale-ups secure 50% less capital than their San Francisco counterparts after a decade. The limited availability of EU investors capable of financing at the scale-up stage pushes EU companies to look abroad. As a result, four out of five scale-up deals involve a foreign lead or sole investor, compared to only 14% in San Francisco.

A unified legal framework would make European startups instantly more attractive to global investors who currently baulk at the labyrinthine nature of cross-border expansion in the EU. Alongside standardised EU-wide stock options, it would give entrepreneurs a reason to stay on the continent, and help reverse the steady flow of European talent moving across the Atlantic.

But for all its promise, many legal questions remain unanswered. The real test is interoperability. Specifically, how will this new regime interact with existing EU directives and sector-specific regulations? Will it supersede, complement, or simply coexist with frameworks like PSD2, AMLD6, CCD2, and the Capital Requirements Regulation?

Take the earlier example of a fintech scaling from Berlin to Paris. It already navigates PSD2 for payment services, AMLD for anti-money laundering, CCD2 for consumer credit, and CRR for capital requirements. After clearing those hurdles, it still faces different national implementations, local consumer protection rules, and varying supervisory expectations. Each market means new legal counsel and months of delay. If the 28th regime is forced to coexist without superseding these national hurdles, it simply adds another compliance layer without solving the underlying problem.

Although financial services passporting already exists, it remains far more complicated in practice than it should be. Varying national implementations, additional local requirements, and inconsistent supervisory expectations mean that ‘passporting’ often still involves months of legal work per market. If the 28th regime doesn’t address how it interacts with existing passporting frameworks, it risks solving the corporate law problem while leaving the financial services bottleneck untouched.

Early leaks from Brussels suggest the Commission may lean toward a ‘directive’ rather than a ‘regulation’, a distinction that matters. Regulation would follow the American and Chinese model of a single, uniform law applicable across all regions. A directive would be a framework that each country implements in its own way, meaning we get 27 different versions of the 28th regime. Choosing a directive would undermine EU-Inc’s overarching goal because it wouldn’t guarantee regulatory harmonisation.

The remainder of 2026 will be defined by the legislative tug-of-war between the European Parliament, pushing for a bold, unified status, and the Council, where member states remain protective of their tax and corporate sovereignty.

Still, the 28th regime represents the most explicit acknowledgement from policymakers that fragmentation is holding Europe back. But acknowledgement and execution are very different things. If the Commission opts for a directive, or buries the proposal in caveats and opt-outs, we’ll end up with another well-intentioned framework that changes nothing in practice.

The fintech sector doesn’t need more good intentions. It needs a single set of rules that works across borders. Only then can we truly compete with the giants on the global stage.