This week has been one of polar opposites when it comes to handling digital asset regulation.
On Thursday, April 18, the industry watched, nay, cringed, as SEC Chair, Gary Gensler, sat in the Congressional hot seat in a hearing that focused, for the most part, on the SEC’s policing of the crypto space.
Meanwhile, today, April 20, in a parallel universe across the pond, the EU government has passed the MiCA legislation in a landslide vote.
The original MiCA legislation aimed at clarifying the laws around digital assets, particularly stablecoins, and an additional Transfer of Funds regulation were passed.
The vote, weighted 529/29 with 14 abstentions in favor of the MiCA law, highlighted the EU parliament’s understanding that the digital asset space needs guidelines to move forward from the “crypto wild west.”
“This puts the EU at the forefront of the token economy with 10 000 different crypto assets,” said Stefan Berger (EPP, DE), lead MEP for the MiCA regulation. “Consumers will be protected against deception and fraud, and the sector damaged by the FTX collapse can regain trust.”
“Consumers will have all the information they need, and all underlying risks around crypto-assets must be monitored. We secured that the environmental impact disclosure will be considered by investors in crypto assets.”
The Transfer of Funds regulation will require crypto companies to identify their customers, acting as a hard-line attack on money laundering through the crypto space.
“This will close a major loophole in our AML framework and implement in the EU the most ambitious travel rule legislation in the world so far, in full compliance with international standards,” said Ernest Urtasun, co-rapporteur for the Economic and Monetary Affairs Committee on crypto-asset transfers
The laws will go into effect in 2024 in a speedy adoption set to create an environment that could be favorable for crypto companies to register.
“This regulation brings a competitive advantage for the EU,” concluded Berger. “The European crypto-asset industry has regulatory clarity that does not exist in countries like the U.S.”
Securities Law still at the center of U.S. regulators’ confusion
Gensler’s hearing, on the other hand, instead of providing the desired clarity, instead highlighted the SEC Chair’s unwillingness to give it.
Many of the questions posed by Congress were dodged regardless of whether they referenced previous public statements made by Gensler. The confusion around securities law in the space was as prominent as ever.
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Committee Chairman Patrick McHenry referenced that Gensler had voiced an opinion on bitcoin, asking whether he could provide the same clarity on the crypto world’s second-largest blockchain, ethereum. After a few minutes of cringe-inducing squirming, it became clear – he could not.
In a CoinDesk webinar discussing the ordeal, Howard Fischer, Moses Singer partner and former SEC senior trial counsel said this “may reflect the internal processes at the SEC.”
Other members of Congress referenced other SEC settlements, questioning the SEC’s approach and criticizing the lack of consensus in their filings.
“Congress must provide clear rules of the road to the digital asset ecosystem because the regulators cannot agree,” Committee Chairman Patrick McHenry said in his opening statement. “Regulation by enforcement is not sufficient nor sustainable. Your approach is driving innovation overseas and endangering American competitiveness.”
His fears are echoed by many in the US crypto space. Coinbase CEO Brian Armstrong, fresh from his own Wells notice, lamented the US approach to the space. “There is almost a sort of techlash in US cities, and it doesn’t make sense. The US has the golden goose every other country would kill to have, yet they want to punish innovation and drive us to other markets.”
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