The Crypto Regulation Winner? EU Holistic Framework vs. US Activity-Based Approach

Hansen and Cameron

At last week’s Converge22 conference in San Francisco, crypto regulation was top of mind for attendees and there was no shortage of relevant content across three days of programming produced by Circle, keepers of the USDC stablecoin.

In a panel titled “View from Across the Pond: Regulatory Change in the EU and UK,” participants reviewed where things stood in relation to the United States.

The panel’s premise was also a helpful reminder of how Facebook’s Libra/Diem project in 2019 inspired fearful regulators across the globe to urgently consider guardrails for the digital asset ecosystem.

As of June 2022 in the European Union, the passage of Markets in Crypto-Assets or MiCA regulation as well as the Transfer of Funds Regulation (TFR) delivered the first holistic regulatory framework for crypto for a large swath of the global population. (For a U.S. corollary, one might point to the proposed Lummis/Gillibrand “Responsible Financial Innovation Act” – a broad framework. Of course, it’s far from being signed into law.)

Patrick Hansen, who is arguably the top source of European Union regulation trends on crypto Twitter as well as an advisor to Presight Capital, joined the panel discussion along with Dr. Lisa Cameron, UK MP and Chair of the Crypto and Digital Assets.

Circle’s VP of Policy and Regulatory Strategy, UK/EU, Teana Baker-Taylor, steered the conversation.

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A Wave of Regulation Sweeps Digital Europe and The Blockchain Industry

Regulation in Europe

European government officials have been busy the past several weeks as efforts to improve the guardrails around the digital commerce and blockchain ecosystems finally came to fruition. Let’s review.

MiCA

Regarding the new Markets in Crypto-Assets (MiCA) regulation framework agreed to on June 30, Stefan Berger, a German centre-right lawmaker who helped lead the European Parliament’s negotiations was widely quoted as saying, “Today we put order in the Wild West of crypto assets and set clear rules for a harmonised market.” He added, “The recent fall in the value of digital currencies shows us how highly risky and speculative they are and that it is fundamental to act.”

CNBC described some of the regulation’s most restrictive elements:

“Under the new rules, stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. Stablecoins that become too large also face being limited to 200 million euros in transactions per day.”

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EU’s Vestager Hails NFTs as a New Way To Value and Compensate

Vestager at SXSW 2022

In an hour-long interview at South by Southwest in Austin, Texas,  Margrethe Vestager, Executive Vice President of the European Commission, offered the European regulator view on technology in the 21st century.

Though her purview does not necessarily cover cryptocurrency as CNBC interviewer Sara Eisen pointed out, Vestager did chime in on blockchain and non-fungible tokens (NFTs), specifically.

She signaled hopeful curiosity:

“The NFT is a new thing. I find it really interesting because, first of all, it questions everything you know about value. And second, maybe it’s a new way for artists and musicians and to get a stronger bite of the value that they create? And that obviously is really interesting. So we follow [it], but it takes us a bit of time because we start to recruit new people [at the European Commission] – not every lawyer is a gamer (jokingly). We need to get more people on board.

I had a very interesting experience because I had at a group of three people advising me during the last mandate when we were preparing the Digital Markets Act. It was a lawyer, an economist and a technologist. To see the three of them working together was really interesting because it took them some time to get used to it. But then once they did, what they achieved was really interesting.”

On tech regulation momentum coming from Washington DC

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