New regulators to shape Europe’s crypto policy
Date: 2024-09-05 Author: Gabriel Deangelo Categories: IN WORLD
This is an election year around the world, and the European Union is no exception. In the fall, the European Parliament will vote on a new European Commissionerate that will turn policy priorities into legislation.
The new commissionerate will not take office until November, so it is too early to assess the impact of the new legislators on crypto policy. However, there are several trends that can be identified that predict how the new legislators will approach regulation.
Europe is shifting to the right
The first trend is that Europe’s center of gravity is shifting to the right, and this will affect businesses of all sizes. Taxation and approaches to innovation will be discussed. France, in particular, will face challenges due to increasing instability and an uncertain political future. These are issues that crypto companies should take into account.
Parliament has shifted to the right, with centrist parties leaning towards less interventionist policies. However, cryptocurrency policy in Europe is generally not a party issue, so there will not necessarily be a regulatory pause for cryptocurrencies. In general, the centrist Socialists and Greens are more sceptical than their centrist counterparts in the (liberal) Renew Party and the (conservative) European People's Party. Despite the growing influence of some far-right parties, the likelihood of MPs from the political extremes actively influencing policy remains low. There is still a stable majority for the centrists.
Struggle for influence
The second trend is the efforts of politicians to fight for influence over innovation policy. During the new Commissioner's term, cryptocurrency policy is likely to depend more on individual actors than on political parties. Some of the new MPs will likely try to establish themselves by specializing in this new policy area. We may also see influential senior policy advisers jockeying for power in the Commissioner's office. It’s also worth noting that the roles of the council chairs are also important, as countries seek to make their mark on EU digital asset policy. For example, Denmark will hold the presidency in the second half of 2025 and has a proactive regulator that is doing insightful work.
The people who replace centrist commissioners Mairead McGuinness and Valdis Dombrovskis will be key to the future of cryptocurrencies. At the parliamentary committee level, where the work actually happens, the economic and monetary affairs policy will remain the most important and influential committee for cryptocurrencies and digital assets. There is a high level of stability in the leadership here, with the socialist group retaining the chair and many of the group’s coordinators remaining in place.
Innovation at the heart of policy
The third trend is the growing awareness that innovation will be at the heart of policy in the coming years. Several areas, such as digital privacy and artificial intelligence, have been identified as EU policy priorities. Expect the Commissioner to be more proactive and aggressive in implementing key laws passed last term, especially the Digital Markets Act and the Digital Services Act, which provide comprehensive regimes for digital gatekeepers, including content moderation provisions for digital platforms.
On the market side, it is worth paying attention to the increasing institutional adoption of cryptocurrencies and distributed ledger technology. This is likely to prompt political intervention. It is unclear whether there are any current barriers in EU regulation. But greater retail investor engagement in cryptocurrency via traditional financial instruments is likely to require a political response.
However, before the EU embarks on new policy developments, there is a note of caution for policymakers and legislators. The EU has done a lot of work over the past five years to provide global leadership on cryptocurrency policy. While other countries are catching up, the EU would be wise to ensure that the rules already developed are properly implemented and “fit for purpose” before embarking on significant additional legislative projects. This is not to say that there won’t be minor adjustments. But the EU should be careful not to move too quickly in a globally competitive (and mobile) industry, as this could lead to companies moving to other jurisdictions rather than raising the regulatory standard for everyone.
European leaders are keen to boost competitiveness, and strengthening the innovative approach to digital assets will certainly help attract the jobs and growth that Europe so desperately needs.
