When it comes to crypto and how governments are dealing with legal issues around it, two distinct approaches seem to exist: America’s and the rest of the world’s.
Europe’s recent passage of its MiCA (Markets in Crypto Assets) legislation was a prime example of these different regulatory approaches to the crypto industry.
The legislation, which could potentially open up more banking services to crypto firms in the EU, passed by a large margin, with European members of parliament voting overwhelmingly in its favor. In America, the legislative progress is fragmented, with different proposals to regulation popping up all over the country in a piecemeal manner.
On a recent episode of Empire, chief policy officers Rebecca Rettig at Polygon Labs and Jake Chervinsky at the Blockchain Association spoke to Blockworks about the contrasting approaches to crypto regulation.
In the United States, Rettig says, “it seems like all parties involved are very far apart from each other,” unlike Europe.
“There’s been a longstanding debate in DC about whether and how to regulate tech in terms of Big Tech generally,” Rettig says, “and it seems to be filtering over into crypto.”
“The US is very different from where the rest of the world is right now.”
Everywhere outside the United States, Rettig says leaders are “building out various types of regulation — both on the centralized crypto side, and then really studying the more nuanced, crypto-native, technological, innovative side of things — and thinking about whether and how to build out a regulatory scheme around that.”
Still a ways to go
MiCA legislation in Europe gives industry participants some regulatory certainty, Rettig observes, but not necessarily today. “Two other votes that have to happen that make it actionable,” she notes, with the framework not coming into “full force and effect” until 2024.
The details will take years to be sorted, Rettig says, but MiCA is a good jumping-off point, allowing businesses to think ahead about how to build legally in the EU.
“There are a lot of hoops to jump over and a lot of restrictions, but you know what they are.”
“The great thing about MiCA,” Chervinsky says, “is it is a genuine attempt to actually tell the industry what the rules are so they can figure out how to comply.”
The industry almost doesn’t care what the rules are, he says, as long as there is a way to comply with them. “We’re a bunch of really smart lawyers and professionals in the industry. We can figure out how to comply.”
“Just tell us what the rules are.”
Plenty of details have to be worked out, Chervinsky adds, with lots of open questions about how rules will be designed. He admits the process in Europe is “somewhat opaque.”
“It’s kind of hard to know what’s going on and how it’s going to come out.”
Achieving clarity
“But I think it’s a huge step forward and frankly, it’s a little bit sad for those of us here in the US to have to say Europe is leading the way and the US is falling behind. It’s very rare that we’re in that situation, but that’s definitely where we are.”
Rettig agrees with Chervinsky regarding the opacity of legal process in Europe, but says she observed a high level of engagement in discussions.
“There is still a lot of willingness to engage and they actually do care how the technology works because they want to get it right.”
Chervinsky says it’s all about achieving clarity. “If you have rules, then you can hire a law firm and say to them, ‘Here’s what we want to do. Here’s the business that we want to launch. Here’s the service that we want to put into the market.’”
“And then they will tell you, ‘Okay, fine. Here are the things that you need to do in order to be certain that you are complying with the laws and the jurisdictions where you’re operating.’”
Zero chance of certainty
“That’s not how it works in the US,” he says.
In the US, Chervinsky says, current vague guidelines might allow a crypto business to mitigate the risk of a regulator showing up and cracking down on a violation, “but there is zero chance that you will ever have total certainty that you are complying with the law.”
With MiCA, even if you don’t love the rules, “at least you understand what the rules are,” and you can comply with them, he says, “without worrying that you’re gonna get a Wells notice and all of a sudden need to spend a few million extra dollars fighting the SEC over something that you never thought would be an issue.”
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