The United States was long considered the haven for legacy technology and the finance industry, and for decades the country’s regulators were considered less bureaucratic than its trans-Atlantic counterparts.
However, things have taken a turn in the opposite direction with Europe now leading the U.S. when it comes to digital asset regulation and adoption.
Last month saw the launch of Europe’s first exchange-traded fund (ETF) in the Bitcoin spot markets with the listing of Jacobi FT Wilshire Bitcoin ETF. The fund issued by London-based Jacobi Asset Management was launched on the Euronext Amsterdam stock exchange on August 15 and also adheres to the European Union’s environmental, social, and governance (ESG) investment rules.
The EU also introduced the Markets in Crypto Assets (MiCA) framework, providing legal and regulatory clarity for digital asset service providers operating within the bloc.
Lack Of Clear Crypto Regulations Making Life Difficult For American Investors
Meanwhile, on the other side of the Atlantic, companies are struggling to gain approval from the Securities and Exchange Commission (SEC) in the race to list America’s first-ever Bitcoin ETF for the spot markets.
Despite the interest shown in the instrument by Wall Street investment giants like BlackRock and Fidelity, the securities watchdog has been delaying its decision to approve any, thus creating unnecessary pressure on the Bitcoin and crypto markets.
Furthermore, the country’s lawmakers are also struggling to come to a common consensus with regard to developing a proper crypto regulatory framework. The situation was not helped by last year’s astronomical collapse of Sam Bankman-Fried’s FTX, which has led to the SEC bringing enforcement action against a host of U.S.-based crypto exchanges.
In an interview with crypto news outlet Decrypt, Lars Christensen, the CEO of Switzerland-based Seer Capital said that recent moves have shown that the Europeans have a major competitive advantage over the Americans when it comes to crypto adoption and regulation.
Europe Saw An Increase In The Listing Of Digital Asset Startups In 2022
Bitcoin-related exchange-traded products (ETPs) have been made available within the bloc since at least 2015 with the introduction of the XBT Bitcoin Tracker One ETP in Sweden. The fund denominated in Swedish krona provides retail investors access to Bitcoin (BTC) traded in the U.S. market.
In the U.S., companies have been indulged in a decade-long battle with the SEC to get their Bitcoin ETPs approved. However, slight progress was made after the securities regulator approved the listing of Bitcoin ETFs in the futures market in 2021, but the Commission continued to raise concerns about market manipulation and fraud when it came to Bitcoin-denominated spot market funds.
Europe’s dominance is evident with the number of crypto-friendly jurisdictions that are currently in operation. According to data published by DealBook, last year saw the launch of 3,977 digital asset startups within the EU, compared to 3,375 in the U.S.
The numbers fared far better for the bloc when it came to seeking funding for projects, with European startups seeing a 14% rise in venture capital investment, compared to a 4% decline in the States.
Crypto Firms Fleeing The U.S. For Regulatory-Friendly Environments
Experts have criticized the intentionally vague U.S. securities laws, which although provide a certain level of flexibility for investors, also lead to conflict between regulatory authorities. The lack of clear rules and regulations has caused some digital asset companies to flee the country.
In April, crypto exchange Bittrex announced that it was shutting down operations in the U.S., citing it was no longer “economically viable” due to a disorganized regulatory environment.
Despite its shortcomings, analysts believe that the U.S. still has the potential to catch up to and even surpass Europe due to having much deeper capital markets and a broader talent pool that will ensure its competitiveness.
The U.S. Congress is also expected to make moves to pass certain crypto bills once they are voted on by the Financial Services Committee in the House of Representatives.
Various crypto officials have warned that due to America’s position as the global financial superpower, any failure to get its act straight regarding digital assets can have massive implications on the cryptocurrency markets globally.
Lowell Ness, a partner at law firm Perkins Coie, said that the U.S. market’s dominance in the financial sector means the rest of the world will have no choice but to wait until regulators like the SEC and the Commodities Futures Trading Commission (CFTC) take an ultimate stance on crypto.
However, individuals and entities starting to relocate to crypto-friendly jurisdictions and still being able to participate in the global financial system with little to no difference is a problem in the making for the U.S., remarked Lowell.