Welcome to the third installment in our “12 Days of Cryptomas” series. While we couldn’t give you three French hens, this is the perfect time to explore how Europe has warmed up to the crypto industry this year.
Without any further bluster, on the third day of Cryptomas, DailyCoin gives you a look at Europe and its place as a regulatory example.
The growth of cryptocurrency worldwide has been attracting major attention in recent years, both from countries looking to embrace it and those concerned about it. Accordingly, the cryptocurrency sector has endured a bittersweet journey, ranging from growing markets, adoption, and expansion to price dips, legal controversies, and unclear regulatory policies.
Cryptocurrency embarked on its journey into the global spotlight from the United States, with Europe and other continents playing catch up. However, the narrative is changing gradually as the United States, despite the efforts of the Joe Biden administration, is yet to have a clear-cut regulatory framework for the industry.
The resulting uncertainty around cryptocurrency regulation in the United States has somewhat dwarfed the industry’s growth. As it stands, Europe is gradually drawing the limelight to become the jewel of the industry due to its comprehensive plans for regulation in the cryptocurrency sector.
Uncertainty of Cryptocurrency Regulation in the United States
The U.S. is yet to have a clear-cut regulation, leaving firms and investors in the dark. There have, however, been efforts from the Joe Biden administration to encourage regulations. As highlighted by the executive orders released in March, the United States has been treading carefully to avoid taming a lucrative industry.
That said, regulatory agencies are keen to address the illicit activities seen in the sector. Nonetheless, the U.S. is currently at a crossroads.
The question of regulatory oversight between the United States Security and Exchange Commission and the Commodity Futures Trading Commission has done little to help the situation.
So what is being done? Ultimately, the Lummis-Gillibrand crypto bill could be the deciding factor in defining the roles of the SEC and the CFTC. Unfortunately, the bill will not intervene in combating the escalating confusion until next year.
At this stage, it’s the question of regulation in the cryptocurrency industry in the United States, at least until next year. On the other hand, Europe is making remarkable efforts and breakthroughs toward letting the industry strive through regulatory stipulations.
Landmark Cryptocurrency Regulation in Europe
With the recent approval of the Markets in Crypto-Assets (MiCA) regulation, the European Union has established itself as a trailblazer. The global regulatory stipulation is the first approach to regulating the cryptocurrency market.
MiCA aims to address the issues of money laundering, user protection, environmental impact, and the accountability of crypto firms. As the first of their kind, the regulatory guidelines will set the tone for other jurisdictions to outline their approaches toward the industry.
The swift approach taken by Europe may well win the hearts of cryptocurrency enthusiasts and investors, thus encouraging further adoption in the region.
The UK to Set the Tone?
The emergence of Rishi Sunak as the Prime Minister of the UK could potentially be another promising sign for crypto in Europe. Previously, while serving as Finance Minister, Sunak had expressed his interest in exploring opportunities in the sector, so his presence at the head of the UK’s government may encourage a crypto-friendly approach on the sceptred isle.
Reflecting on this, Sunak is working on designing clear-cut regulatory standards for cryptocurrency. A friendly approach towards the nascent industry was outlined in the UK’s financial reforms. Recently, the UK government also extended the exemption from paying crypto-related taxes to investment managers.
European Nations Consolidate Efforts to Help Crypto Thrive in Europe
While the UK and the European Union have been leading the charge, Italy has made its own contributions to the cause. As of October 2022, Italy has approved more than 73 cryptocurrency firms to carry out business activities in the country.
While crypto assets are taxed up to 25% in Italy, the presence of cryptocurrency firms is on the rise. Nevertheless, the tax rate is still friendly compared to countries like India.
Despite the tax rate, the high number of crypto firms in Italy indicates that the country has a strong market opportunity for cryptocurrency to thrive.
Crypto Capital Cyprus
Similarly to the UK, Cyprus is pushing to become a cryptocurrency hub. The country’s approach to the industry has inarguably contributed to Europe’s favourable stance on cryptocurrency.
In a recent interview, Cyprus’s Deputy Minister for Research, Innovation, and Digital Policy, Kyriacos Kokkinos, addressed the opportunities provided by the industry and revealed how the country has approached regulating cryptocurrency.
During the interview, the Minister addressed the opportunities embedded in the industry. Kokkinos outlines that the industry needs efficient regulation to survive.
Therefore, as part of his plans to establish Cyprus as a crypto hub, the minister consulted with an offshore regulator on how to tackle the industry’s issues. The result was the birth of a drafted bill on crypto assets, Blockchain Technology, and Distributed Ledger Technology (DLT).
The Regulatory Approach in Europe and the United States
It’s imperative to establish the fundamental differences in the approaches the United States and Europe take regarding regulation policies. Though cryptocurrency is yet to have a clear-cut regulatory framework in the US, some bodies still exercise oversight functions over the industry.
Exacerbating the confusion, cryptocurrency regulation in the US differs from state to state, leaving the sector with widespread contradictions regarding regulatory policy.
Contrary to that, Europe’s MiCA regulation is set to provide members of the European Union with a unified and transparent set of regulatory policies; this, in turn, will give firms and cryptocurrency enthusiasts clear guidelines for utilising innovative technology.
Spot the Difference
At the recent Web3 summit held in Vilnius, Lithuania, Binance’s Vice President for Government Affairs in Europe, Daniel Trinder, voiced his thoughts on the matter.
According to Trinder, Europe’s approach comes in a bold pattern that aims to regulate the industry in advance. On the other hand, the United States’ approach has been reactive; the country waits for the industry to grow and then designs regulations to meet current trends.
Arguably, the stance from the United States has yet to help the industry, instead creating confusion among firms and investors alike. Recently, Nexo, a cryptocurrency lender based in the US, halted operations in the country due to unclear regulations.
How Regulation in Europe Can Influence the U.S.
On a fair note, the Joe Biden administration has been open in its desire to consult with stakeholders on how to best regulate the industry—and that much is evident from the executive order issued in March.
With Europe advancing steadily towards well-structured regulation, the United States won’t hesitate to take inspiration from the MiCA guidelines to design its own. As the first clear-cut regulatory policy globally, MiCA will serve as a key perimeter for future regulators aiming to outline their regulatory policies.
On the Flipside
- The EU welcomes comprehensive crypto regulation, but stablecoins have remained a source of skepticism for policymakers. Robert Kopitsch, the Secretary General of Blockchain for Europe, stated that the EU is unhappy with stablecoins in general.
Why You Should Care
As the UK continues to move towards becoming a crypto hub, the US lags behind due to its unclear regulations. As the US is still home to many cryptocurrency firms, it’s high time that some regulatory policies are implemented.
Read more of our holiday feature series:
12 Days of Cryptomas
Find the previous iteration in the series here:
Can Layer-2s Help Ethereum Finally Flip Bitcoin? – The Future Ethereum
What did DailyCoin bring for the fourth day of Cryptomas? Find out here:
Four Positive Events in the Crypto Space This Year