While Europe Passes Crypto Regulations, the U.S. Still Has No Idea How to Regulate Bitcoin & Co

The E.U. has passed comprehensive regulation of the crypto industry. With that move, they’re years ahead of the U.S., which is still struggling to figure out what to do with crypto. 

E.U. Lawmakers Pass MiCa Crypto Regulations ⚖️

April was an eventful month for the crypto industry. Not only because we saw a lot of innovation happening, from new Bitcoin tech to Ethereum’s Shanghai upgrade, but also because we finally have some clarity about regulations. 

Well, at least in Europe. 

The U.S. is still lacking behind and, to date, has no clue how to regulate Bitcoin and the rest of the crypto asset market. 

But the issue is not just with the regulators. It’s with the decision-makers in both chambers. Either they don’t get what Bitcoin and crypto are about, or they just don’t like that it’s something they can’t control. 

Interestingly, regulators and decision-makers in Europe seem to understand it better. Two weeks ago, lawmakers in the European Union voted 517-38 in favor of the Markets in Crypto-Assets (MiCA) framework. 

With this vote, they were the first major jurisdiction to introduce a comprehensive crypto framework with a scheduled timeline to go into law by the end of 2024. MiCA will lay the groundwork for further regulation and crypto-related legislation in the E.U. 

MiCa aims to protect users and investors by requiring platforms, companies, and token providers to inform investors of potential risks. Additionally, they must provide detailed reporting and audits to reassure users that their projects are secure. Although, the focus for these audits is primarily on stablecoin issuers, who must maintain sufficient reserves to meet redemption requests in the event of mass withdrawals.

In addition to MiCA, we saw a second vote on the Funds Transfer Regulation (FTR). It passed 529-29 in favor and will require crypto operators to identify their customers to prevent money laundering. 

In short, there will be a threshold of €1,000 for users to require verification or explanation of where the funds they receive or spend are from. Now this is the law that left a sour taste in the mouth of many Bitcoiners. 

In general, the industry favors regulation and clear guidelines, but we also want to protect users and build a thriving ecosystem. However, it’s not favorable to finally get a framework to regulate the industry and see lawmakers overdo it. 

Maybe MiCA is a step in the right direction, but the Funds Transfer Regulation over-regulates the industry and removes many of the benefits we see with Bitcoin. 

Every user can decide what they’ll do with their wallet. If they want to add a token and trade it on a decentralized exchange, they should be able to. No KYC (Know Your Customer) is needed because we can all verify the ownership over our digital assets with the cryptographic key, aka the private keys, of our wallet. 

As I mentioned, MiCA is a step in the right direction. However, it looks like the E.U. might be overdoing it by overregulating the space. Whether they did this on purpose or not is a whole other discussion. 

The fact of the matter is there are very aggressive points in these frameworks we need to address and get sorted out. If we do, we might see the beginning of a thriving crypto ecosystem in Europe.

Gensler Gets It! 🥊

Last month, U.S. Securities and Exchange Commission (SEC) Chair Gary Genser was in the hot seat. He testified before the House Financial Services Committee for almost five hours on the topic of crypto assets and how they should be regulated.

Well, it didn’t go too well. 

Both sides of the aisle weren’t happy with him and his agency, and he wasn’t able to answer whether Ether (ETH) is a security or not. 

However, the problem is not with Gensler directly but with the processes behind closed curtains and the current political system we find ourselves in. 

The SEC and CFTC have been under much scrutiny lately with the failures of banks, financial institutions, and crypto giants like FTX. Instead of giving them some space and clear guidelines on how to solve these problems, government officials blame them. 

Gensler and his gang can’t get the job done if they constantly reassure everyone that they’re doing the right thing. Instead of driving innovation forward, we stand still and try to hurt it as much as possible with internal fights between government officials and government bodies, such as the SEC or CFTC. 

All of this charade is at the cost of the consumer. 

More and more people get scammed because they don’t know how to protect themselves or because there are no rules in place. It’s down to government officials to leave their egos behind and work on solving the problem by providing clear rules. What shape they will take in the U.S. remains to be seen. 

Coinbase Sues the SEC 🤼‍♂️

The best use case for the mess we find in the U.S. and crypto regulation is the recent lawsuit between Coinbase and the SEC. 

The company and its CEO, Brian Armstrong, were always prominent pro-regulation voices in the U.S. They provided guidance, went public in 2021 on American soil, and stood by for any questions. 

However, the SEC announced actions against several crypto exchanges and individuals earlier this year. The sale of staking products or tokens was the center of attention. Coinbase was also involved but cooperated and contacted the SEC in case they needed help. 

For months they never heard back from them. 

No guidance or help was provided, and in Coinbase’s eyes, these actions were not enforced by rules or laws but used as an example to show government officials or people in power what the SEC is capable of. 

Brian Armstrong and Coinbase have had enough. They responded with a public video on their YouTube channel and announced a lawsuit against the SEC. All of these actions in January and the past haven’t been enforced by laws but rather by arbitrariness.

This lawsuit is another example of why we need clear regulation and how far behind the U.S. is. While European Bitcoin companies are largely able to engage in healthy discourse with regulators, U.S. companies have to sue the government body responsible for providing guidance.

Tune in to the Proof of Words Podcast 🎙️

Last but not least, I want to feature my podcast, Proof of Words. 

The idea is simple: I want to interview and feature the best and brightest minds in Bitcoin, tech, finance, and more. 

Guests can share their stories and what they’re working on or explain current events to give the listeners the scope of what’s happening in the space. 

Our first guest episode is out now, and I had Mike Schmidt on from Brink. After meeting Mike, my company, Samara Asset Group, granted Brink $150,000 to help finance ongoing Bitcoin development. 

In the episode, Mike and I spoke about Bitcoin Core, what projects Brink supports, and what we can expect from the developer community in the coming months. 

Watch the full episode on YouTube, listen in on Spotify, or visit ProofofWords.io to learn more. 

Your stacker in sats, 

Patrick Lowry