The growth in crypto - Interview with Peter Kerstens, European Commission

Summary

In this insightful discussion, Peter, a key advisor to the European Commission on financial innovation, addresses the progress of the Markets in Crypto-Assets (MiCA) regulation. He highlights the importance of implementing rules and the urgency of meeting the June 2024 deadline for stablecoin provisions. Peter also discusses the challenges of regulating emerging financial innovations like NFTs and DeFi, which were not part of the original MiCA proposal. The conversation touches on the potential of MiCA as a regulatory model for other jurisdictions, acknowledging the unique position of the US in this regard.

Takeaways

• 😀 Peter is a key advisor on financial innovation at the European Commission and is considered a pioneer in the field of MI (Markets in Crypto-Assets).
• 📈 The success of MI will be determined by its adoption and implementation, with Peter leaving it to posterity to judge its success.
• 📝 The MI regulation includes MAA (Markets in Crypto-Assets Act) which is a significant part of the process but requires further implementing rules and delegated acts for clarity.
• 🔍 The European supervisory authorities are currently developing standards for MAA, which will be turned into delegated acts by the Commission.
• ⏳ There is a sense of urgency in the development process due to the approaching deadlines for MAA application, especially with stablecoin provisions starting on June 30th and crypto asset service providers by December 31st, 2024.
• 🏛 The European Parliament elections will temporarily halt the review process for delegated acts, affecting the timeline for MAA's full implementation.
• 🔄 The Commission is expected to complete the implementation process in time for MAA to go into production, despite the tight schedule.
• 🚀 MI aims to address new financial innovations but acknowledges it may not cover all emerging areas like NFTs, DeFi, and crypto lending, which were not prevalent when the regulation was drafted.
• 📋 The legislature has asked for a report on issues like non-fungible tokens, decentralized finance, and crypto lending by the end of 2024 to assess if regulation updates are needed.
• 🔑 The MAA includes 'passporting rights,' allowing licensed entities to operate across the EU, which is crucial for the single market.
• 🌐 While the EU's approach to MI regulation may serve as a model for other jurisdictions, the 'Brussels effect' may not influence all countries, especially the United States, which tends to follow its own regulatory path.

Q & A

Who is Peter and what is his role in the context of the discussion?

Peter is referred to as the 'father or grandfather of MI', implying he is a key figure or pioneer in the field of financial innovation within the European Commission.

What does Peter mean by 'MAA' in the transcript?

MAA stands for the Markets in Crypto-Assets regulation, which is a part of European legislation aimed at regulating the crypto asset market.

What is the significance of the 'MAA process' mentioned by Peter?

The MAA process refers to the development and implementation of the Markets in Crypto-Assets regulation, which includes adopting standards and implementing rules to provide clarity on the provisions of the regulation.

What is the deadline for the MAA application related to stablecoin provisions?

The deadline for the MAA application related to stablecoin provisions is the 30th of June of the current year mentioned in the transcript.

How does the European Parliament's closure due to elections affect the MAA process?

The closure of the European Parliament for elections affects the MAA process because all delegated acts need to be sent to the Parliament for review, and if the Parliament is closed, the review cannot be conducted, causing a delay in the process.

What are the three areas that the legislature has specifically asked the European Commission to report on by the end of 2024?

The three areas are non-fungible tokens, decentralized finance, and crypto lending and borrowing.

What is the concept of 'maximum extractable value' mentioned by Peter?

Maximum extractable value refers to a practice where validators of crypto transactions reorder them in a 'mean pool' to increase their mining benefits and potentially trade against transactions in the pipeline, which is an issue that needs to be investigated.

Why did the European Commission create an enabling regime for crypto assets?

The enabling regime was created to allow consumer and investor interest in crypto assets to be channeled within the EU, under regulatory oversight, rather than moving abroad to less regulated environments.

What is the 'Brussels effect' that Peter refers to?

The 'Brussels effect' refers to the influence of European regulations on global standards, where other jurisdictions often follow or are inspired by EU regulations.

How does Peter view the potential for the MAA to serve as a model for other jurisdictions?

Peter suggests that while there is no copyright on the MAA, and it could serve as a model, the extent to which other jurisdictions will emulate it is uncertain, with some possibly finding it too permissive and others, like the US, following their own regulatory paths.

What is Peter's final thought on the likelihood of the US adopting a regulatory framework similar to the MAA?

Peter ends with a quote from Churchill, implying that while the US may not immediately follow the Brussels effect, they may eventually adopt a similar regulatory framework after exploring other options.