Congress is dispatching a delegation of staffers to the European Union.
Over a dozen US Congressional staffers – largely crypto and fintech specialists – will be heading to Brussels and Paris, tasked with learning about the EU’s new legal framework for crypto. They will meet with EU officials and regulators as well as crypto industry lobbyists for firms and trade groups based in the bloc, say six people with knowledge of the trip.
The delegation’s agenda lists meetings with members of the EU’s parliament and regulators, including the European Banking Authority and the European Securities and Markets Authority. They will also meet with representatives for firms and industry groups based in the economic bloc including Ledger, Blockchain4Europe and Adan.
The core mission: to study the EU’s landmark Markets in Crypto Assets regulation, or MiCA.
“MiCA will provide legal certainty to companies having or wishing to launch activities in the EU,” said Faustine Fleuret, president of French crypto trade group Adan and one of those meeting with the delegation. “Although it will not be perfect, we will know what the rules are.”
It largely leaves DeFi untouched – which some devotees prefer
A massive and wide-ranging law, MiCA is the centrepiece of a broader fleet of legislation governing crypto in the EU. A final vote on MiCA was scheduled for February but has been pushed to April or May due to delays in translating the regulation.
Implementation through the regulators’ decision-making and the EU’s member states will take longer still, and companies will not be held to the law’s standards for another 18 months after the ink has dried on the final signatures. But MiCA itself is miles more comprehensive than any legislation touching crypto that has made it into U.S. law. The financial world is watching.
The European and American crypto industries take issue with several provisions of MiCA. Its requirements on stablecoin issuers seem, they say, favour massive incumbents. It leaves plenty of room for European regulators to quibble over outstanding questions like token classification. And it largely leaves DeFi untouched – which some devotees prefer.
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A particular sticking point is a provision that seems to leave foreign companies less liable to supervision if they don’t actively target EU customers.
“If we don’t supervise markets and we don’t guarantee that everyone complies with rules, it will be detrimental to our competitiveness,” says Fleuret.
But, as the General Data Protection Regulation has done for internet firms, the economic breadth of the EU and the global nature of crypto business means that MiCA may well set a standard throughout the world.
Certainly that is a concern as a newly assembled Congress picks up the subject of crypto. Senator Sherrod Brown, Democrat of Ohio, recently opened a hearing before the Banking Committee that he chairs by calling for “a comprehensive framework to regulate crypto products.”
Brian Armstrong, CEO of Coinbase, pushed for urgent legislation. Many of his peers in the industry do the same
Per a roster obtained by DL News, staffers for both Brown and his Republican counterpart on the committee, Tim Scott, Republican of South Carolina, will be part of the delegation. Leaders of the House and Senate Agriculture Committees and the House Financial Services Committee are also sending staff to attend, as are several lawmakers with track records in cryptocurrency. Those include Senator Cynthia Lummis, a Republican from Wyoming, Representative Stephen Lynch, a Democrat from Massachusetts, and Representative Warren Davidson, a Republican from Ohio.
“The goal is to gain an understanding of the framework that EU has set up to regulate crypto and learn what can be applicable here in the US,” writes a staffer for Senator John Boozman of Arkansas, the leading Republican on the Senate Agriculture Committee and one of the authors of the Digital Commodities Consumer Protection Act.
The industry’s offshore argument
Crypto boosters are fond of warning that the current lack of law on crypto endangers US competitiveness. As Senator Katie Britt, a Republican from Alaska, phrased it in the recent Banking Committee hearing: “There’s a lot of talk about overregulation, stifling the market, essentially taking jobs and innovation and offshoring them to places like China.”
Brian Armstrong, the CEO of crypto exchange Coinbase, recently tweeted: “America risks losing it’s [sic] status as a financial hub long term.” Armstrong pushed for urgent legislation. Many of his peers in the industry do the same.
This urgency is never far removed from fear of the US Securities and Exchange Commission. The crypto faithful routinely cast current Chair Gary Gensler as their nemesis. Their preferred legislation typically guards crypto assets from SEC jurisdiction, which Gensler asserts already covers the lion’s share of the industry without the need for new law. Centralized exchanges like Coinbase find themselves squarely in his sights amid a broader ongoing SEC crackdown.
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But, especially since the crypto collapses of 2022, culminating in the criminal prosecution of FTX CEO Sam Bankman-Fried, lawmakers in the US — including Gensler’s allies — have been more vocal about interest in hypothetical legislation.
Historically, the countries that have adopted comprehensive regimes for digital assets have been smaller countries like Singapore and Hong Kong or, less stringent, the Bahamas and the United Arab Emirates. As an economic superpower, the EU’s experiments with crypto law will serve as a much more apt testbed for American observers.
But observers are not sold that a delay will damage US competitiveness.
“We shouldn’t rush to copy MiCA,” says Seth Hertlein, head of policy at the Paris-based Ledger. “It’s the first attempt at a comprehensive cryptocurrency or digital asset regulation in the world.”
“The real issue is, ‘In what part do we want to be competitive?’ In regulation, there’s both a race to the top and a race to the bottom,” says James Angel, a Georgetown associate professor who studies global markets.
Congressional crunch
Congress is eagerly mulling broad crypto legislation, but specifics become tricky and lack traction.
“About once every 10 or 20 years we have a crisis and Congress says, ‘Oh wow we have to do something,’” said Angel. “Until there’s a catalyst and something’s really blown up and they say, ‘We’ve gotta do something here,’ nothing happens.”
Moreover, as happened with the 2010 Dodd-Frank Act, the most recent monumental financial law in the US, lawmakers left years of discretionary rulemaking to regulators like the SEC and the Commodity Futures Trading Commission – which Gensler chaired at the time.
MiCA will likewise allocate crucial decision-making to their European counterparts. Any crypto law of scope, should it come, in the US is likely to do much the same.