Key Insights
Europe is ahead of the US with its MiCA framework, which offers crypto companies a unified form of regulatory clarity.
The U.S. has relied on enforcement-first tactics for many years in the past until recently, which has created uncertainty for crypto firms.
Clear regulations could determine where innovation and investment flow.
Regulatory clarity is now one of the biggest deciding factors for the future of the crypto markets.
Governments around the world are realizing that clear rules can either drive innovation or push it away. Among these governments, the United States and Europe are two of the leaders in the race to set these standards.
Particularly, Europe currently has the lead with its Markets in Crypto-Assets (MiCA) framework. The US, on the other hand, continues to move with its current patchwork of laws, including the GENIUS and CLARITY acts.
The European Union has already pulled ahead in the race for regulatory clarity. Its MiCA framework, which was introduced in 2022 and rolled out in 2023, was made to be a unified set of rules for all 27 of its member states.
Instead of having to create separate national laws, companies now have a single regulatory pathway to follow.
This means that a crypto-asset service provider (CASP) that receives regulatory backing in one EU country can operate anywhere else. This makes scaling much easier and compliance less expensive.
It also encourages more firms to choose Europe as their base.
The MiCA provides issuance rules for crypto companies, in that any project issuing crypto-assets must publish a white paper with detailed project information.
This framework also creates strict categories for stablecoins, including e-money tokens (EMTs) and asset-referenced tokens (ARTs).
Exchanges and custodians are also expected to face high transparency and governance standards in order to protect users and protect the market’s integrity.
Finally, the EU extended its “Travel Rule” to crypto transfers. This means that companies are now required to collect sender and recipient details during transactions to reduce money laundering.
In sum, Europe is creating a harmonized system that is helping it to show the crypto industry that it wants to attract innovation, Albeit within a clear legal framework.
Unlike Europe, the U.S. has no unified legal structure for crypto. Instead, it has multiple agencies that compete for authority.
For example, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are two of the biggest dogs in this fight.
The SEC applies the Howey test to decide whether an asset is a security, with former SEC Chair Gary Gensler arguing that most crypto assets aside from Bitcoin are securities.
Current SEC Chair Paul Atkins, however, appears to be more open to crypto and has seen several lawsuits against entities like Coinbase, Binance and other firms dropped within his tenure.
The CFTC, on the other hand, was another source of conflict because it classified assets like Bitcoin and Ether as commodities in ways that sometimes contradict the SEC.
On top of that, each U.S. state has its own set of rules for crypto reserves, accumulation, criminal prosecution and general crypto oversight.
Several bills have been introduced to bring order to U.S. crypto regulation. Initially, the two biggest bills were the Digital Commodities Consumer Protection Act (DCCPA) and the Financial Innovation and Technology for the 21st Century Act (FIT21).
Both of these aimed to define jurisdiction and provide rules.
However, with the recent election of former President Donald Trump and the passage of the CLARITY/GENIUS Acts, the US is getting up to speed and is closing the gap against the EU.
As of writing, Europe is ahead because of its first-mover advantage. MiCA has given the EU a single and predictable system. However, the US is catching up fast and is letting go of outdated securities tests under its current chair, Paul Atkins.
For companies deciding on where to start building, regulatory clarity could be all the difference. Europe’s proactivity has set it up as a leader, with the US trailing closely behind.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.