Why European Commission Regulations Won’t Kill Crypto in Europe

And if you don't like the EC's current regulatory proposals, there's time for you to do something about them.

THE EUROPEAN COMMISSION HAS ITS EYES ON CRYPTO. I

About the author

Tom Lyons is an independent communications consultant based in Zurich. Previously an Executive Director at ConsenSys Switzerland, he currently advises the European Commission on its blockchain-related communications. The opinions expressed here are his own, and do not represent the opinions of the European Commission or Decrypt.

At the end of September, the European Commission released its new Digital Finance package, which included two sweeping regulatory proposals specific to crypto-assets and blockchain. 

There is little doubt that this is a big deal. If passed, both the Regulation on Markets in Crypto Assets (MiCA) and the Pilot regime for market infrastructures based on distributed-ledger technologies (let’s call it Pilot) will set the tone for the crypto industry in Europe for a decade at least.

The good news is that the industry has been waiting for just this kind of regulatory clarity. But now that it is here, there are—perhaps predictably—voices crying foul as well. Criticisms of MiCA have run the gamut from crippling blockchain innovation to favoring incumbents to destroying all hope for DeFI in the EU. 

Did you know?

DeFi, shorthand for a group of mostly Ethereum-based, non-custodial financial products, boomed in 2020. It's grown from a $600 million industry in January to $12 billion in October.

There are certainly some potentially serious issues. But I can’t help being reminded of the outcry when the GDPR came into force. Clearly, reports back then of the death of European crypto at the hands of the EU’s data protection regime were premature. While not downplaying some of the challenges MiCA/Pilot represent to parts of the crypto industry, I think the story here is likely to be similar.

The European Commission does not want to kill crypto or blockchain in Europe.

I have been working with the European Commission’s blockchain team in various communications-related capacities for almost three years now, and have been pleasantly surprised by what seems to me its fairly progressive take on blockchain innovation and decentralization. 

In terms of MiCA, as the Commission has written itself, the intention is to provide legal certainty for the crypto-assets ecosystem across Europe to make it easier for the industry to scale while still providing adequate protections. Instead of throwing all crypto-assets willy-nilly under securities regulation, as is too often the case in the US, MiCA attempts to reach this balance by a bespoke regime that regulates crypto-assets that are not financial instruments along a scale of protective measures aligned with risk. At least below certain thresholds, the Commission considers these significantly lighter-touch rules than those applying to securities.