In an article I wrote for Cointelegraph, I commented on how the European Union has moved forward to regulate the crypto-asset market through Markets i
In an article I wrote for Cointelegraph, I commented on how the European Union has moved forward to regulate the crypto-asset market through Markets in Crypto-Assets (MiCA) and Transfer of Funds Regulation (ToFR). With this subject as a background, I had the privilege of interviewing one of the people who knows the most about regulating new technologies: Eva Kaili, vice president of the European Parliament. She has been working hard on promoting innovation as a driving force for the establishment of the European Digital Single Market.
Check out the interview below, which covered key points about MiCA, some proposed legislative provisions proving to be more controversial than others, such as decentralized finance (DeFi) remaining out of scope, rules administered through self-executing smart contracts (Lex Cryptographia), decentralized autonomous organizations (DAOs) and more.
1 — Your work in promoting innovation as a driving force for the establishment of the European Digital Single Market has been intense. You have been a rapporteur for several bills in the areas of blockchain technology, online platforms, Big Data, fintech, AI and cybersecurity. What are the main challenges legislators face when introducing bills involving new technologies?
Technology develops rapidly, and innovative solutions need some space to be tested and developed. Then, policymakers need some time to understand how these technologies have been shaped, consult with stakeholders, and measure the expected impact on traditional markets. So, the optimal way forward is not to immediately respond to any technological development with a legislative initiative but rather to provide time to the technology to develop and to the policymakers to educate themselves, comprehend the benefits and challenges of innovative technologies, digest how they are supposed to affect the current market architecture and, then, suggest a balanced, tech-neutral and forward-looking legislative framework. To this end, in Europe, we adopt a “wait and see” approach, which leads us to safely proceed by answering three fundamental questions: (1) how early should the technological development be regulated? (2) how much detail should the proposed regulation include? and (3) how broad should the scope be?
In this context, new challenges may arise, amongst which to decide whether to use old rules to new instruments or to create new rules to new instruments. The former is not always viable and may have unintended consequences to legal certainty as amendments or modifications may capture a complex legislative framework. On the other hand, the latter needs time, consultation with stakeholders, interinstitutional scrutiny and more. In any case, it should be duly considered that the answers to these questions determine the growth of the market, the time to reach this growth and the impact of the said regulation to other markets, as there is also a geopolitical dimension to be considered while regulating new technologies.
2 — In 2020, the European Commission launched a Digital Financial Package that has as its main objective to facilitate the competitiveness and innovation of the financial sector in the European Union (EU), establish Europe as a global standard setter, and provide consumer protection for digital finance and modern payments. What does a regulatory framework need to consider to be a competitive advantage in a given jurisdiction?
As I mentioned, today, it is more critical than ever to consider the global geopolitical dimension and effect of a prospective regulatory regime regarding new technologies. You see, in the new global digital economy, the concentration of technological capacity increases the competition between jurisdictions. For example, technological inter-dependences and dependences between the dominant market players, and the geographic regions they control, are evident in Asia, Europe and America. In this context, digital products and services translate to power, have strong geo-economic implications, and facilitate “digital imperialism” or “techno-nationalism.” Thus, any prospective regulatory framework should be seen as a source of national or jurisdictional competitive advantage, generating robust, innovation-friendly, risk-immune markets. It may attract human capital to sustain innovation and financial capital to fund innovation over time.
These principles were the main driving forces for the DLT Pilot Regime and the Markets in Crypto-Assets Regulations, as we succeeded two milestones: creating a first-ever pan- European sandbox to test DLT in traditional financial market infrastructures and the first concrete set of rules regarding crypto, spanning from crypto assets, including stablecoins, to issuers, market manipulation and beyond, setting the standards of what a crypto market regulatory approach should look like and creating a competitive advantage for the European single market.
3 — Blockchain’s initial reputation as an…
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