The popular music, film and interactive festival SXSW (South by Southwest) took place this week in Austin, Texas and included some programming devoted to digital assets.
Unfortunately, several policy luminaries ended up cancelling including Senator Cynthia Lummis (R, WY) and New York Department of Financial Services Superintendent Adrienne Harris. Participating executives from Coinbase and Circle also rotated out senior leadership with executives who lived in the “neighborhood” or were slightly more junior. No doubt the unfolding banking crisis in the United States played a role.
Nevertheless, the show must go on and in a well-attended panel discussion titled, “Regulating Crypto for Responsible Innovation,” Peter Kerstens, an advisor at the European Commission, appeared as scheduled.
Kerstens shared that he participated in the discussions last month with U.S. Congressional staff in Europe about the Markets in Crypto-Assets (MiCA) legislation developed for the European Union.
With the perception by some that the U.S. lacks an appropriate regulatory framework for digital assets, Kerstens welcomed the idea that the United States might participate in what is known as the “Brussels effect.”
He explained on stage:
“I’ve been at the European Commission for 27 years …. one of the things which I have observed is that the US gets to innovate, Asia get to copy and improve, and Europe gets to regulate. We’re always first out of the box with laws and regulation. (…)”
“But what we do see is something which academics call “the Brussels effect” – regulations developed in Europe for the EU tend to be emulated in other jurisdictions. Sometimes because they are good ideas, but also because they represent an outcome of 27 different countries and, usually, in such a process all the permutations and all different possibilities [are covered]. And that end result often ends up inspiring (…)”
“I’ve also seen that there’s one country which is rather than new to this “Brussels effect” and that is the United States. But, it’s not that there’s no effect at all, for example, we see this in our General Data Protection Regulation (GDPR), which got a lot of flack from Washington… We have now seen it in a number of states (such as California) replicated as far as GDPR …So maybe it happens with MiCA as well.”
“[We had the opportunity] to meet with congressional staffers in Brussels, Paris. This was bipartisan, the House and Senate Finance Committees – it was a very diverse group of crypto enthusiasts and crypto skeptics. And we very much impressed on them that there is no copyright with MiCA so if one day they decided to get on with it and are looking for inspiration, they are entitled to freely plagiarize MiCA.”
After the panel discussion, Mr. Kerstens responded to Securities and Exchange Commission (SEC) Chair Gary Gensler’s recent comment to Politico: “Do you know that MiCA doesn’t even cover Bitcoin?”
Mr. Kerstens said:
“It is not true. MiCA covers issuers of crypto assets and crypto asset service providers. When it comes to issuance, the issuer must provide a white paper with essential disclosures in line with the requirements of MiCA. If there is no issuer, as is the case with Bitcoin, these requirements can not be applied: the issuer, the requirements of the issuer.
“But service providers who provide services for crypto assets, and there is no doubt that Bitcoin is a crypto asset, must comply with the prudential, market conduct, market integrity and investor protection requirements of MiCA. Such service providers include custodians, brokers, trading venues and exchanges, advisors, etc. Consumers and investors dealings with crypto assets, including Bitcoin, is mainly through such service providers and in the EU they will be protected through MiCA.”