Crypto won a significant victory in Europe on Monday. The European Parliament voted to advance a regulatory proposal without a controversial provision that would ban proof-of-work-based cryptocurrencies like bitcoin.
But the debate in Europe is far from over. And it highlights a major challenge for the industry: The battle over how crypto should be regulated is playing out in different ways in major geographies.
The EU’s approach on crypto regulation is slow but steady. The proposed regulatory framework in the Markets in Crypto Assets bill could set the stage for the digital asset industry on an international level if adopted into law.
- First introduced in 2020, the the Markets in Crypto Assets proposal went through a number of revisions and delays due to controversial language requiring environmental sustainability standards for proof-of-work-based cryptocurrencies like bitcoin and the initial version of ether. While some EU leaders have called for a proof-of-work ban since November, the EU vote ultimately excluded the language.
- “Many countries around the world will now take a close look at MiCA," Stefan Berger, the European Parliament member spearheading the legislation, said in a press release. He called it “pioneering” in its establishment of “reliable supervisory structures” — something crypto companies in the U.S. have called for.
- While many in the crypto industry saw Monday’s vote as a win, the industry is set to see more legislation proposed to combat crypto’s negative environmental impact, in line with European Green Deal goals.
- The European Commission will present a proposal to amend the MiCA bill to include language for “the EU sustainable finance taxonomy [of] any crypto asset mining activities that contribute substantially to climate-change mitigation and adaptation” by January 2025.
The U.K., meanwhile, is cracking down on crypto, with an emphasis on stablecoins. The U.K., which has forged a separate regulatory path since Brexit, is working through getting the industry properly licensed and registered.
- The Financial Conduct Authority announced this month that it had 50 live investigations into unauthorized crypto firms after opening over 300 cases related to unregistered crypto businesses.
- The Treasury has also revealed plans to specifically regulate stablecoins, as they were deemed an immediate risk to traditional payment methods.
- But while it’s forging its own path on enforcement, Britain is expected to be “largely consistent” with the EU’s approach to crypto regulation, said ComplyAdvantage, a London-based provider of financial-compliance software and data.
Crypto is grappling with bigger regulatory problems in the U.S. The country’s fragmented financial regulatory scheme, including multiple agencies jockeying for a role in crypto and 50 states exercising some level of financial oversight, is a headache.
- Crypto is under fire on multiple fronts. The SEC is arguing that many cryptocurrencies are actually securities that must be subject to strict regulations. The Treasury Department is concerned with financial stability as well as money laundering and other crimes.
- The U.S. has “separate securities laws and separate derivatives or commodities laws” as well as “very broad concepts of what constitutes a security,” Michael Philipp, partner at Morgan, Lewis & Bockius, told Protocol.
- That makes the U.S. the “most complex” and the “most difficult place to do business” for crypto companies, he added. Philipp’s advice for crypto entrepreneurs: “Unless you’re able to commit to the regulatory [process], start somewhere overseas.”