LONDON (Reuters) - The European Union’s banking watchdog set out a “roadmap” on Friday to help plug gaps in how the rapidly evolving financial technology sector is regulated, but urged caution in tackling cryptocurrencies.

FILE PHOTO: Andrea Enria, chairperson of the European Banking Authority, speaks at Reuters Summit interview in London, Britain, September 25, 2017. REUTERS/Afolabi Sotunde

New EU rules from January make it easier for start-ups to offer traditional banking services such as payments.

Andrea Enria, head of the European Banking Authority, said the watchdog will analyze the nature of services provided by fintech firms “with a view to ensuring that similar services, entailing comparable risks, are regulated in a consistent way across the EU”.

The watchdog, which helps the bloc flesh out banking rules, will report on its assessment by the end of the year.

Regulators have held back for several years from introducing comprehensive rules for fintech, saying the sector is still tiny compared with mainstream banking. Politicians are also keen not to stifle innovation as London, Paris and Berlin jostle to lure fintech firms.

Enria said EBA will review regulatory “sandboxes” or controlled environments set up by some national regulators to allow fintech firms to try out new apps on customers.

“We need to ensure that firms can enter and participate in the internal market for financial services on an equal footing and that a high standard of consumer protection is maintained,” Enria said in a speech at Copenhagen Business School.

Brussels made its first foray into fintech regulation this week by proposing an “optional” licensing system for crowdfunding.

Enria said that bringing fintech firms under the same supervisory umbrella as banks just because they compete in some of the same sectors is not the right answer.

But “heightened monitoring” was needed on the links between banks and fintech firms, which often develop new services jointly.

Enria said EBA may recommend changes to existing EU financial rules to make them “technologically neutral” and proportionate for fintech start-ups.

UNCHARTED CRYPTOS

The EU has said it “stands ready” to regulate cryptocurrencies if no action is taken at the global level after the Group of 20 economies (G20) meets later this month to discuss possible rules.

Despite some central bankers calling for regulation, there is no strong consensus for new global rules given the different approaches being taken by countries, ranging from bans to no action at all.

Enria said he was “yet to be convinced” that cryptocurrencies should come under the full gamut of regulation, a move that would enter “uncharted territory” and require many years to develop.

Instead, a more “nuanced” short-term strategy could focus on applying anti-money laundering and terrorist financing rules, warnings to consumers - a step already taken by EBA - and preventing banks from holding cryptocurrencies.

“This strategy would avoid granting any official recognition to a sector that is still very heterogenous, changing fast and, as such, difficult to regulate and supervise,” Enria said.