EU Markets in Crypto-Assets (MiCA) with Seth Hertlein, Patrick Hansen, & Rebecca Rettig

Talking about the state of regulation in Europe. Not the US this time, but in Europe. This is a very relevant episode, David, because you and I have talked a lot about regulation in the United States. It's not a topic that I like to think about very often, um, but we we do talk about it from time to time in uh in Bakeless podcasts, and especially recently. We have hardly ever talked about what's going on in Europe, just kind of passing comments. I allocate about 10% of my brain to regulation because it's just like it's not fun to think about, but sometimes you gotta. Uh, this week is one of those weeks. Um, and most of that time is reserved for the regulatory state of the United States. So we wanted an update on what is going on in Europe. And it actually sounds like, David, the lawmakers in the EU are doing their jobs.

Actually

Looking at crypto somewhat objectively, I think, and proposing legislative frameworks to help us move forward. That is something that we don't have the luxury of in the United States. And I want to find out more about that on today's episode. But why don't you give us a tease? Who do we have on and what are we in for today?

Yeah, across the pond, there's this thing called MICA, uh markets in crypto assets, which is the regulatory proposal, a landmark regulatory proposal that is working its way through Europe. Uh and so we're gonna talk about that because there is actual progress being made. For better or for worse, there's at least a conversation happening. Um there are some wins, there are some some losses, and so we're gonna talk about the nuances of the Micah proposal in the EU. Uh, but uh it's in stark contrast, Ryan, to what's happening here uh in the United States, where there doesn't really seem to be a conversation, there just seems to be an onslaught. So at least we have that jealousy to look forward to uh from our American standpoint. We have three panelists on because this is a big conversation. We have Rebecca Redig, who is the chief policy officer over at Polygon Labs, started there as of a week ago, so congrats, Rebecca, from the new position. Uh, there's also Seth, who is the VP of Global Head of Policy at Ledger. Ledger, the hardware uh wallet company, of course, that everyone knows. If you did not know that it is a France-based company, now you know. Uh, and also Patrick Hansen, uh, director of EU strategy and policy at Circle. Uh, and so these people combined probably know as much as there is to know about the state of crypto digital asset regulation in the European Union. And so we are going to get up to speed with what is going on across the pond as it relates to digital asset regulation and what can we really learn from the actual progress that's ac actually happening, at least somewhere in the world, if not the United States.

And I, you know, I could comment further, but I don't think we should, David. I think maybe uh us dumb Americans should just um stop commenting and bring on our guests. And we're about to do that, but before we do, we want to thank the sponsors that made this episode possible, including

Welcome, Bankless Nation, to this panel about the state of crypto asset regulation over in the EU, talking all about this mica proposal. On the rightmost side of the screen, we got Seth, who is the VP Global Head of Policy at Ledger. Below Seth, in the bottom right corner of your screen, we got Rebecca Redig, who is the Chief Policy Officer at Polygon Labs. Rebecca, congrats on the new position. And then in the bottom left corner, we got Patrick Hansen, who is the director of EU policy and strategy at Circle. Seth, Rebecca, and Patrick, welcome to the show. Thank you guys so much for being here.

Thank you.

Thanks so much for having us and for touching that topic of EU regulation.

Yeah, and so just to to really kick things off here, uh Ryan and I are gonna be dunces when it comes to this. So we're really looking to you guys to really help us understand what's going on here. Uh and so uh Rebecca, just picking one of the three, I'll I'll start with you. Uh the state of crypto regulation in the United States is kind of a mess. Uh how's it going across the pond?

It's going much differently in the EU. I think we have to take it back to where Mika really started. This really grew out of the introduction of DM slash Libra back in 2017. And I think real work started to be done on Mika in about 2018.

and and you guys say Mika, not Micah.

I don't know, maybe Patty will correct me, but

Who's the right pronunciation? Give it to us.

Mika. Alright.

I also say Mika because it's markets in crypto assets. So

Ah, consensus. We're already making progress.

All right, all right. Sorry for interrupting.

Oh no, no, that's okay. So it started back and and I think it the kind the concept really grew out of Libra and thinking about how to regulate.

that type of stablecoin. I think there was a similar type of um

interest and concerns in the United States as well, but it really spurred um the European Union to think about what types of regulation should come out. Um obviously it was just approved um by the Parliament and we should talk about the process of what happens in the EU.

This is very different than what happens in the US. Although I guess you can think of the member countries as the states and the commission to be a much broader umbrella, like we have in the federal system in the United States. But anyway, they built out this system where it really covers what are called CASPS, crypto asset service providers. These are centralized or CFI players. So things like custody, trading, exchanges, market makers and OTCs, investment advisors, they're covered by it, as well as how you can do an issuance of tokens publicly. And then there are some exemptions for private token issuances as well. And it's really a it tends to be a very comprehensive piece of regulation. But Seth and Patty should also sort of weigh in and talk about, you know, what we're building out here as well.

Yeah, sure. So you know, I think that's an important context that that Rebecca uh brings up that you know that Mika really was the the European response to Libra. And and it actually goes a little bit deeper than that. Um

Which uh uh you know I think uh Patty can

probably speak to, but there's there's the sense in in Europe, uh particularly among policymakers, that that Europe sort of lost Web2.

Um you know, that uh you know, that that all of sort of the Web 2 giants are, you know, well, first American and then increasingly Chinese.

Um

You know, the only one you maybe you could point to in Europe is Spotify.

And, you know, so there's this, there's this sort of sense that Europe lost Web 2.

And then when Facebook, sort of the big evil, you know, Web 2 giant from the US, announces uh Libra, it really scared uh it really scared European policymakers that, like, oh no, we're gonna lose the next thing.

And you know, so so Mika's.

You know, there was a strong reaction to Libra in the US. Um, you know, I I I was in Congress uh uh the day uh actually the the building

uh when uh when Zuck testified

uh for the first time on Libra. And you know, so there was a strong response in the US, but I think it was it was much more

uh

palpable in in Europe, uh sort of the threat that it posed. And so uh uh you know policymakers immediately got to work on

uh on Mika uh as a response to Libra, and that's why it overwhelmingly focuses on stable coins to this day.

But it sort of grew, it Frankenstein's a little bit into other areas, you know, almost right up until the end. And we can get into that a little bit later.

But that's it's you know, that's sort of the origin of of Mika uh and uh I think a lot of why it's sort of structured the way it is.

So Seth, really quick, just to double click on that point before we hear from Patrick on that. So you're saying part of the impetus for this uh Mika legislation is actually the US wanting to not miss the next wave of the internet.

So you

not the US.

The EU. Yes, I said the US, not wanting to miss the next wave of the internet. And so this was like a was this like sort of a well in in Europe, our competitive advantage will be clarity and regulation. And that's how we will win crypto innovation in the next phase of the internet in our jurisdiction. Was that the approach and is that the strategy? And is that sort of coming through?

Yeah, I mean there there's there's a bit of a joke um, you know, that that you know Europe's uh or the EU's chief export is regulation. Um, you know, so I think

And there have been some speak uh speeches from you know from from high-ranking EU officials uh or from the from the European Commission in particular about leading on regulation. So that's that's absolutely a philosophy that um you know is is at play here.

Um and and I actually don't think in the specific case of of sort of Mika Libra, I I don't think it's so much about um

you know sort of not losing the next phase of the internet. I think it was more a specific fear of Facebook um and um sort of the continuing the web two loss. I don't think it had quite

I don't think the opportunity of Web3 had had sort of quite um you know

gotten into the the political discourse yet. Um but but I'd I'd love to hear Patty's thoughts on sort of how how it developed.

yeah, happy to. I I think to begin with, it's it's important to note that Mika is really a comprehensive regulatory package for crypto. So

I think that's the main difference, by the way, with how things are currently planned in in the US, where

there is one regulation that is supposed to cover stable coins, one regulation that could target

um crypto asset exchanges, for example.

In Europe, Mika is really, I sometimes refer to it as the one regulation to rule them all, because it really covers

all types of token offerings,

ICOs, IDOs, etc. Covers all types, as Rebecca mentioned, all types of crypto asset services.

So exchange, custody, brokerage, advice, etc.

And it also covers stablecoin issuers and the operation of a stablecoin business.

And on top of that, it also sets market abuse standards for the entire trading space. So it is one very comprehensive package in the EU

that will be binding for all 27 EU member states. So I think

it's