Will New Legislation Make The US a Dominant Global Crypto Hub? | EBC11

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very Hello. Is that working? Yeah, there we go. Uh, thank you very much everybody. Uh, I'm conscious we're the last panel between you and lunch, so we'll try and keep it as interesting as we can. Um, my name is Mark Foster. I am the EU policy lead for Crypto Council for Innovation. We're a global trade association representing some of the bigger players throughout the tech stack. So, but I won't bore you with that. You can find out more details on the website or come and talk to me later on. I'm delighted to have an all female panel today. Uh so we got a bad slot in terms of the timing, but uh it's really nice to to have that expertise here. I'm going to let the ladies introduce themselves and their organizations and then we're going to try and answer the question, talk a little bit about policy

and a little bit about politics. So from my left and over to you first, please. >> Hi, good me everybody. My name is Anne Turmine. I'm head of policy and other legal matters at Yuga Labs. For those who aren't familiar, Yuga Labs is responsible for the board of yacht club and the other side metaverse. >> Hi, I'm Josh Clayman. I am at Link Leaders with a global law firm. I am US head of fintech and head of blockchain and digital assets and I'm one of our global tech sector co-heads. >> Hi everyone, my name is Marina and I'm leading the European crypto initiative.

Uh it's a blockchain association based in Brussels and we are basically discussing all blockchain and cryptoreated topics with regulators. >> Excellent. So let let's go straight to the question and maybe we'll start with Marina first just to give a kind of external perspective. So we're talking about the the US obviously it's been a lot of legislative developments and also changes in terms of outset with the regulators in the US but seen from a European perspective perhaps first. Um what's your take in in terms of the question will the US be a a dominant player in in the global crypto hub and then we'll come to our US-based colleagues. Yeah, >> very easy answer for sure. Uh I think it's it's uh important to look into this from in way historical perspective and

of course looking into the future. I would say that it depends. Uh we have like not a very clear answers as lawyers. We usually always respond as like it depends but uh I see that there is like a huge huge difference in the US right now from what we have seen in the past. As you all know there was mostly enforcement rather than regulation for the last few years and right now we have seen the genius act and going into the market infrastructure act discussions. So regulation is here and it is coming. We have not seen that much enforcement but I know that my colleagues will talk more about that. Um I think mostly what when it comes to enforcement, it's really coming from uh in a way private

uh maybe uh class action uh lawsuits. Uh but to me what was really one of the most uh interesting parts was uh looking into how the crypto ecosystem I would say is just revived. Uh there's so many ideas, so many new projects, so many new things happening. uh and it's really one of the most active industries uh right now compared to the EU uh we have not had enforcement we had regulation we do have regulation right now uh what's happening is that we might have enforcement in the future maybe in a year two years etc but right now everyone is really focusing on understanding Mika on understanding how

Mika will be implemented with different I would say crypto as a service providers as well as issu ers stable coins are a huge discussion right now. It's a really important topic in the EU uh mostly in Brussels as well but with national combinant authorities and uh I'll just take a moment to maybe explain a little bit what's going on there. uh the discussion we have right now is really based on a Q&A which is an instrument that different authorities can ask to the European Commission when they have a question regarding the interpretation of Mika and in this case the question was really what happens with multi-issuance when it comes to a

company issuing the same token in different jurisdictions and in this case we did not get an answer for this specific Q&A yet there's been a long process of discussions within different institutions and we do really expect this uh I would say clarity to come quite quickly also because some of the stable coin issuers have been in a way stopped for for some uh I would say months um there's been uh delays in in new announcements of issuing stable coins and uh together with other associations as well we have just published a letter uh and discussing this letter with with other institutions mostly with the commission on this

topic. So I would say that mostly regarding national combinant authorities we have seen a few um I would say um uh licenses given I think it's around 68 of them right now for crypto as a service providers but big question when it comes to stable coins so we need a little bit more clarity there. >> Excellent. Thanks Marina. That's a a depends maybe the US moving forward and progressing a little bit but uh the EU obviously having started earlier we'll see what that means in terms of uh the global outlook. So three lawyers maybe three different answers let's see uh Josh what's your perspective in terms of where the US is currently and whether it can be a global crypto hub.

>> Sure. So I'll keep my answer pretty short just because I know we're going to delve into the US in greater de detail in a couple minutes. This is my 12th time speaking at at this event. I spoke at all 12s and it's the first time that I can say in my heart the US is open for business for crypto. Everything isn't perfectly clear. There's still a lot of ambiguity and things that need to be figured out. But if you've seen me speak in any of the prior 11 of these, you heard me uh talk about caution and consider not entering the US. I think now is is the time. So, not legal advice, not investment advice.

>> Excellent. Thanks. Thanks, Josh. That's a clear yes. Uh we can dig dig a bit deeper into that uh going forward and from your perspectives uh where do you think uh the US is in its kind of trajectory on this thinking and and how that affects your business as well of course. >> So I don't want to say it depends. I'd rather say I hope it's a vehicle for innovation as Josh said because now there is an opportunity to to really develop without fear. You know, when you work at a company like Yuga Labs and they come up with an idea and the first thought is, should we check with legal first, that's not innovation, is it? So, my hope is that if and when the US can get its act together and get a bill

passed, that we can accelerate the world's adoption of crypto. Because if crypto is really to be what it's supposed to be, it's egalitarian, isn't it? It's not supposed to be dominated in any one country. It's supposed to break down the borders. So maybe if the US can come online with this regulation, maybe we'll actually achieve that vision of crypto. >> Excellent. Yeah. And of course we had the stable coin building through Genius Act, but obviously we're still waiting for the for the market structure piece which is a >> and waiting and waiting >> which is a big one. um in in Europe of course we kind of did the two together in one sense but um maybe just like unpacking a little bit more about the the policy kind of uh environment and uh do you want to say uh either an or or

Josh a little bit about um you know that dynamic in terms of stable coin legislation now in place we touched upon already the mindset change a little bit in the regulators which has obviously come from a political signal um how do you see that moving forward uh and and developing as we move into uh the next uh phase days of legislation still talking about policy and then maybe over to Marina for a reaction to that in terms of what's happening in Europe and how Europe might be relating to some of those developments. So I don't know whether Josh and Gohead. >> Sure. So I I think what's really interesting is that if you look at for example just holding aside others but you just look at the current chair of the SEC Paul Atkins and the prior chair of the SEC Gary Gensler. Gary Gensler

went to Congress and said, "I have all the tools I need to enforce. You know, it's perfectly clear. None of this is legal, right? And I don't need additional authorization. I have it, right? We don't need new laws." And then we hear Paul Atkins who is pretty much in in the vacuum of Congress getting a market structure bill passed although a lot of work has been done and continues to be done to advance one who says actually look we have the authority we need to actually accommodate this technology right with the the project crypto and things like that. So I think it's been a real mindset shift um not just you know with the president coming out very strongly even on the campaign trail and then really delivering on his vision of making the US the crypto

capital of the planet um but also then the regulators follow following suit. I would just say one thing about um the Genius Act just in case people aren't aware. Genius is law, right? But it hasn't become effective, right? It still needs its implementing regulations and rules and Treasury has has promulgated some proposed um rules for for public comment and things like that, but we're still a ways away from it actually going into effect. That being said, I think just the fact that the US got something passed anything past is amazing. So maybe I'll pause there. That >> that's great. And Josh, we were talking earlier as well. You might want to just

carry on on the point about the legacy impact of the previous regime in terms of enforcement as well because obviously there's been a mindset change and a political change uh visav the regulators, but there's still obviously some hangover from the previous regime as well. Maybe just close that point off and then we'll move to an for thoughts as well. >> Sure. So okay. So is it all a rosie all the time? Maybe, maybe not, right? We still have a lot to figure out. One of the things that is a bit challenging in the absence of the market structure legislation is that we don't actually have new law. Now, you may say, well, the regulators have gotten comfortable with this. It's great. We're not going to see or we don't expect to see largecale enforcement if there isn't fraud or actual crime, right? Like

that's that's still hopefully going to be enforced. Um but what we do have is a situation where the regulators may be comfortable at the federal level. However, we have some law on the books from some cases that were brought in the previous administration and it's still law. So the library case still exists, right? Which says that the library token was a security, right? We still have Ripple which kind of split the baby, right? With portions of it saying there were sales of securities and other portions saying nope, no securities there. So even though we're now more comfortable generally with the idea that the token itself unless it is a traditional intentional you know tokenized security that the the digital asset itself is just code and that you

know the transaction needs to be looked at from the Howy test. We still have the howy test. We still have the Reeves test. And so um while we and Marina touched upon this a little bit while the federal government might not be enforcing private plaintiffs still may be bringing actions based on the law that's there. So that's why it is important that we get a change in law cuz otherwise you know there's only so much teeth that changes of regulators have. However that's a huge piece. The last thing I would just say on this quickly is that the states, you know, they can do their own thing and you know there are very strong feelings both ways about the current administration in the US and some states, you know, they they

feel very differently. They they have different views on crypto. That being said, some states have long been pro- crypto, including Wyoming, where I'll be heading tomorrow. And I think it's interesting as the US goes back and forth at the federal level. hopefully not not back again the other way. Um that some states have been towing the line for crypto for a long time >> and and we were talking earlier about innovation uh as a broader concept rather than just financial legislation and financial regulation. Um you obviously have background as a a former public sector uh person as well. to what extent in terms of that that dichotomy between financial legislation, financial regulation versus innovation, how how do you see that in your in your business and your day-to-day work with Yugalabs?

>> So, Yuga at Yuga, we're just focused on getting work done, right? We want to build and we want to build as freely as possible. Um, I will say that I'm a little bit biased on how the US approaches things because I am a former regulator. was at the CFTC for 13 years and I was in private practice advising clients as well and it's now at Yuga when I go to the Hill and try to explain to senators and representatives what it is we do. They're like you you have a monkey jeep like it's more than that. So that's the hardest thing is to get people to take off of their face whatever lens they look at crypto. Like if you look at the crypto through a financial lens, you're only going to see

it in one way. If you look at it from the perspective of the CFTC, then you're only going to see commodities and derivatives everywhere. And all I want people to do is to recognize the variety of things that we're doing. You know, yes, you could say that I have monkey JPEGs and that's all Yuga is. Then you're completely missing the point of my company and you're completely missing everything that we're doing and building and innovating. When you look at Apecoin that our token for our community that became a chain our own blockchain that to accelerate what we're doing there and then other other side and what other side could mean for web 3 try to explain that to senators who are just interested in like do my farmers have enough money

to make it through the month that's our issue and if we can make this easier for senators and representatives to understand so we can get to a bill then we might actually get to the mass adoption that crypto needs to accelerate to the next level. >> Yeah, I think that's a really good point because we we often forget sometimes now our little bubble that there's a bigger world out there, there's bigger things going on uh in terms of legislation and laws. So, uh Marina, um from your perspective in terms of Europe, obviously first mover uh now seeing the US developing uh with an ambition to kind of maybe be a little lighter touch, a bit more innovation friendly. Uh what's your take in terms of this uh dynamic between financial rules and legislation and then broader innovation?

We have have obviously Mika, there's a DT pilot project. There's also a lot of work in Europe on the EI eidas and things like that. How do you see it? >> So, um, one interesting thing that you mentioned is really tokenization. Uh, this is something that, you know, everyone in Brussels is talking about and pretty excited about as well. Uh, but not even tokenization. I would say that we go back to the basics to understanding what Mika actually means and what it brings to the industry. I think besides having like regulation having a ton of guidance and regulatory technical standards coming from the European security market authority European banking authority we still don't have a lot of clarity even on the

basics in terms of understanding for example what is the difference between a crypto asset and a financial instrument uh right now the European banking authority European securities market authority published their own uh annual reports or annual planning for what they're going to do next year. So if you're bored, you can take that in the evening and start reading it. It's it's kind of predicting the future. So looking into what will happen in the next year and ESMA said that they will write additional guidance to make sure that the industry understand what a crypto asset is versus a financial instrument and that is really the most important thing. As you know financial instruments might defer in different member states and this is where really the catch is. Another thing is again as

you mentioned uh you know stable coins other questions but you have also probably heard in the news that different national combatant authorities are now having different opinions on potential supervision especially on centralized supervision for mostly bigger CASPs so significant CASPs uh some do agree with that for example the French authority some disagree the Maltese authority so we have a lot of I would say uh so-called drama still uh we have a regulation everything is set in place there's been licenses given but not everything is going perfectly smoothly and in a way uh I would say it was expected uh you would agree Mark uh I think also because it is much bigger

than only crypto assets I think right now the European Union is really working on the savings and investment union uh and this is just part of it so thinking about how to implement a structure where the European Union could be seen as a in a way unified financial uh market as well for everyone to enter but also to offer services to. Thanks Marina. Uh I don't know whether any reactions to that. I one thing that I'd like to just touch upon in terms of the policy then we can move to the kind of politics perhaps more for the final part of the conversation. Um we talk a lot in this industry about interoperability uh and obviously international standards, international standard setting bodies uh a key part of trying to make uh this global uh market

work. Um I don't know whether any of you have views about again the different jurisdictions that are going in slightly different directions, slightly different speeds. Uh again this this US administration's view in terms of how it wants to be a crypto hub versus what that means for international standard setting bodies. I can see an from your >> Yeah, I can I can take that one quickly. My biggest concern is definitions because crypto is constantly innovating. As soon as you try to put a definition on one term, you've automatically limited that term and that is that is when I speak to regulators around the world um that is my my biggest concern because when you started the definitions that becomes your regulation, right? So if you put something into this bucket

that bucket that defines what the regulations are. So for me where Yuga it's really hard to define our buckets. Uh that's where I try to get the regulators to think in a more broad fashion. Um I think crossborder it's going to be difficult to because of you know Singapore's in one place, Hong Kong in another, the European Union in a different place and US is doing whatever the hell US is doing which is nothing because we're in the middle of a shutdown but that's a whole another story. um it'll work itself out when and when you look at what happened after the financial crisis in 2008 and I was in the UCF during this whole time and watching the passage of DoddFrank and other regulations um uh particularly in the European Union. We managed to figure

it out. We'll do it again, but it's going to be painful and probably costly for the industry along the way. Which is why you should be active. you should be talking to your regulators so we could get the to a much quicker place than it took after the financial crisis. At least that's my perspective. >> Thanks an any any other reactions. >> Yeah. So I agree with an about the importance of of definitions. I would also say and maybe I don't know how popular or unpopular a view this is but I think when we talk about harmonization across various jurisdictions I mean it reminds me of something from college where I I took a class I don't even remember what class but I remember someone saying be rational means see it my way right and so I think spending a lot of time on harmonization of these

vastly different regimes I I think that's at least across the jurisdictions I wouldn't focus our efforts on that maybe on recognition bilateral recognition of certain um certain aspects right but trying to harmonize everything we can't even do that across the 50 states in the US um incl like if you look at at the Genius Act right where it has a federal path that's permitted with the OCC charter and it also has state paths for example with state chartered banks like the SPDI in Wyoming for example, even just trying to get recognition of those, you know, individual state charters in other

states, that's a whole process. So, I do think sometimes, yes, in some wonderful world, it will be plugandplay. You can just, you know, navigate freely. But I think um if we focus on harmonization across jurisdictions as the goal, I don't think we're going to be able to reach that goal um anytime soon. if there's any consolation we also have quite a bit of differentiation in Europe as well even though we have Nika which is supposed to be a regulation but Marina I don't know whether you have views on that as well >> yeah maybe two points there we do have a crypto assets report from IOSCO and even a D5 report then I remember when we looked at it I think they published it two or three years ago there's no definitions there so to your point I

think that would be a quite a hard thing to do to really have a definition of a crypto asset and all the uh you know other assets like stable coins uh in in a document where everyone in the world or everyone that is a member of aosco would agree with. So that is one. The second one it was just published a financial FSB published something on stable coins as well saying you know the governments are not doing enough when it comes to stable coins. We need to supervise more. we need to regulate more and we're getting this papers opinions continuously but the end of the day I think that the implementation of different regulations might come through equivalence as you mentioned uh

different projects are thinking right now how to be compliant in different jurisdictions and I think that there's been discussion coming from the US thinking about equivalence regimes uh as same of course as mentioned with stable coins in the EU and here we will need to have this also bilateral discussions to understand if there's trust in a regulation that one jurisdictions has adopted and then there would be uh in a way seen as equivalent and also for uh I would say for the industry is also easier to implement >> so still a role for the international standard setters and the importance of that kind of collaboration between regulators at global level >> may I just respond to that a little bit and I do agree with you Marina I would just point for the IASCO reports for a

second like my friend Val span IC at the SEC who is my friend right she wrote those right and she's no longer focused on digital assets right she has now she's heading up AI innovation at the SEC and now we don't have a FinHub we have a crypto task force so it does make me think like yes we have the IASCO report say on DeFi for example which basically said look you can look at DeFi and apply existing law and find the various players doing the various pieces But now the view at the US regulators is quite different. And actually the view in Congress is is quite changing as well as we know from the leaked DeFi draft um

from the Senate Democrats which caused a lot of you know uproar um from people in the industry and also from from Republicans. So I I do think that it is helpful that we have those reports. I do think that some of the changes that we're seeing in the US likely will call into question how much of what was written a couple of years ago still is the view. >> Yeah, that's a good a good reminder that policy isn't in a in a bubble obviously is impacted by the politics uh of the given day. Um conscious we only have a few minutes left so let's maybe try and stick to that kind of political angle and you mentioned earlier the government shutdown in the US. Uh again trying to stick to the theme a little bit to what

extent uh is that affecting kind of day-to-day uh evolution of of policy in the US uh and obviously you mentioned the market structure bill going forward to give us a sense about how you think that might develop uh and then obviously Joshua Josh sorry we'll come to Marina to close us off maybe in terms of the EU how we are in Europe reacting to that and then we'll have some concluding thoughts. Thank you. So, with the shutdown, that means that in all of the agencies, there's a very skeletal staff. Um, I worked through a shutdown. That was not fun. Um, may or may not have a relative who's still working through a shutdown. It's still not fun. Um, and it's it it puts you in a really difficult situation when you're in an agency because you you're just trying to

keep the doors open and trying to keep matters moving forward, but you can't really solve for anything because you need the full staff there to get things done. Same thing on the hill, right? Uh, not everybody, all the staffers for all the senators and legislators are working. It's a skeletal staff. So trying to get bills and trying to get conversations happening to get, you know, the Dems back on board with backing off of their DeFi bill on the Senate side versus what the Senate um Republicans have got going on, it just slows things down. And when when you throw into the fact that the uh US is going to go through a midterm election next year, by the end of this year, people are going to be focused on what do I need to tell my constituents so I can get reelected by the end by November

of 2026. So if we don't have something really substantive out of Senate comparable to what the House already has with its Clarity Act, I'm a little concerned as to whether something is actually going to pass in the US before 2026. Even if it gets passed, it goes to the regulators, goes to CFTC and the and then they have to implement it, which then puts it another year down the road. So if we're lucky, this the US will have some sort of legislation that's fully implemented, but not before 2027, which again slows down the industry. So what do we do? We do nothing from the from the regulatory point of view, from the from the company point of view. You got to keep working and you just keep having conversations to make sure that you

don't fall into one of those avenues that could end up being a roadblock somewhere down the road. Um, and you cross your fingers and you hope that sanity reigns, but it's Washington. and I've lived there my entire life. It never rains standing in Washington. >> So, there's been a lot of progress in the last 12 months, but potentially some some barriers in the next 12 months going forward, both in terms of the the politics and the policy. Josh, any other points to you'd like to add to that? >> I would say Ann frame that really well. May I just touch upon one other separate thing and it's something that also came up on the last panel that we were watching which was decentralization and what its role is. Like I realize there are some true believers in decentralization. Um, and so I hold that aside for a moment, right? There are

benefits to decentralization for those who were doing it just to avoid the SEC or some other kind of regulator. I do think that is something that is shifting right now as Ann mentioned, you know, the focus on innovation rather than decentralization. And even in some informal chats, um, there has been a question, you know, with with key regulatory staff at the SEC about what is the importance of of decentralization and should that actually be a goal versus just having the best products, the best developments, the best building, right? Um, but I know Marina has also heard more about that. So, >> thanks Marina. Do you want to close us out just in terms of the how the EU is reacting to these developments in the US? everyone wants to be a a crypto

global hub but maybe a few thoughts from you and then and then we'll let these good people get off to their lunch. So thank you very much. >> I think there's the the activities and in a way the revival of the industry is a little bit contagious in the EU as well. Uh there's a lot of interest. We see also from FinTech coming in. But as you have seen our commission has worked also on other initiatives linked also to the previous panel which it comes to investments, startups, innovation mostly around the 28th regime. You have probably heard about that really supporting innovation in Europe and investments as well as the uh in way European tax. So enforcing Europe, enforcing European companies through Mika, of course, through crypto, but

within fintech and and other innovations as well. >> Excellent. So lots of things to keep us busy, lots of politics, lots of policy. Uh please join me in thanking the panel and then hope you all have a nice lunch. >> Thank you everybody.