Crypto Asset Regulation: EU vs USA vs ASIA

[Music] thank you daniel and good morning good afternoon or good evening depending where you are because we have this international panel and international audience it's wonderful to be part of this fantastic event many important and very much needed discussions interesting speakers and of course thank you to all the attendees because without interested and engaged audience and stakeholders that are here present we would not have events like this and the progress in blockchain would surely be more difficult so my name is agata ferreira and i would like to welcome you all to our panel crypto asset regulation eu versus usa versus asia interesting but even more so very important and timely topic a few words about me i'm a lawyer by background scholar and university assistant professor at the warsaw university of technology i'm also member of expert panel and blog and eu blockchain observatory and forum as well as member of advisory council for blockchain for europe it is my great pleasure to welcome here today our panelists i'm especially delighted to be moderating such an all-star all-female panel from literally across the globe as danny has mentioned so all our panelists are top professionals in the field with remarkable achievement in blockchain space and i'm very grateful they found the time in their busy schedules to join us here today and share the incredible knowledge and experiences so i just introduce you briefly and then i ask each of you to say a little bit more about yourselves i welcome joshua clayman of linklaters who is joining us from the us or ursula mccormack from king's roots and violence that is joining us from australia tina baker taylor that is joining us from crypto.com from the uk and nina sidler from dwf and board member of nafta that is joining us from germany if i could ask each of you to say a few more words about yourselves maybe we start from nina all right happy to start my name is nina zitla as you mentioned partner at dwf where i had the global blockchain competence group since 2017 when i joined that firm i have a background in structured finance and regulatory work and uh was drawn into blockchain in 2015 since then had been very much involved in the community building um you know we talked to numerous politicians trying to explain what this new technology is about and and what you know good and positive sides it could serve for the community formed in 2017 the german blockchain association and then in 2018 um a european legal think tank called think block tank in luxembourg and was then approached by the european commission to support with building inatba the international association of trusted blockchain applications in brussels which happened in 2019 with more than 100 founding members and where i had been elected to the board of directors for the first uh board yeah currently i'm trying to focus a bit more on you know content work rather than community building um also part of the expert panel of the european blockchain observatory and farm where agata is also a member and what is of specific interest for me is the unit working group for digital assets where there is first of all a group taking a look at the civil law questions and not only the financial regulatory questions of digital assets yeah josh i had the pleasure to meet also in 2017 at the university of pennsylvania the wharton wreck-it tech group um and i really miss you know that this group didn't come together for quite a while now and ozil and i we met now oh let me think a year ago or something uh and tina obviously you know we're both from from europe uh we have been on so many occasions together so it's a pleasure to be with all you together on this panel here thank you very much nina for this introduction tina can you go next sure thank you so much agatha and it's really a genuine pleasure to be on this panel today with um friends from far and wide it's rare that you get to know everyone and have worked with them in some capacity over the years on one panel so that's quite fun um so i'm tina baker taylor i am the general manager in the uk for crypto.com i lead our uk market strategy in our regulatory affairs here in the uk um i have worked across europe um and at a global level on policy issues around crypto assets i'm formerly the director of global digital finance which is an industry organization uh working to develop some standards and best practice guidelines for crypto and digital asset firms and that entity was founded in about 2018 early 2018 and 2017 really on the back of the ico boom um and where the experience the excuse me industry experience a huge amount of growth and also a huge amount of um weird and wonderful things coming to market that regulators are really struggling to grapple with and that organization and all of its community members there are now hundreds um worked to um at a global level try to align and harmonize some of the thinking around policy for crypto asset regulation um so that we didn't have lots of pockets of arbitration opportunity and um more opportunity to interact and inter-operate around the globe um as digital assets are indeed global assets i'm part of that i was in banking working on enterprise blockchain so i've been in the blockchain space for a period of time i think what i'm most interested today in is looking at how regulation is impacting um the the commercialization of um not just digital assets but blockchain in general and um we're really starting to see a huge amount of innovation especially i think in the device spaces you know one example of a industry growing at a rapid pace that regulators are struggling to keep up with and potentially trying to re-engineer um some policy um after the fact so um i am looking forward to covering some of those issues with this panel today and looking at where some of the differences are across the globe thank you very much for this introduction tina i hope we get the time to talk about all these things uh maybe we quickly move on to josh and a few words from you josh hi i'm josh clayman um i am senior counsel at link leaders where i'm one of the global tech sector co-heads and i'm the us head of fintech and head of blockchain and digital assets um in the us we call our practice the digital economy group as opposed to to fintech per se to try and take you know a more expansive view of that apart from that i'm on the board of the wall street blockchain alliance and i've chaired the legal working group there since 2016. um i have the pleasure of being part of a number of industry working groups as well as some groups that are close to my heart including node women and diversity and blockchain inc which are both focused on diversity and and supporting of of perhaps underrepresented groups um beyond that uh my background i for the first 10 years or so of practice before i got into blockchain i was a finance and corporate transactional lawyer and actually got into the blockchain space because i was hearing about how big banks that i was representing in in large leverage finance transactions were looking into smart contracts and i was like what's a smart contract um and what does this mean for my job so that was a long time ago now um and we've come a far away but um i love the space and i'm really excited to be on this panel with all these great leaders thank you so much edgar thank you ursula please say if you want yeah yeah look i'll keep it brief so i'm so delighted to be here i'm polished by background married to an irishman so europe is a very big part of my background uh i grew up in australia in hong kong for 13 years and now back in sydney uh basically covering asia still uh and uh very much focused on asia so i'm a partner of international law firm kingwood malicious and i pretty much squarely focus on financial and data regulation with a particular focus on emerging technologies and of course within that virtual assets particularly over the last six years i guess on the policy side hugely important to all of us and i work a lot alongside our regulators as well as governments in the region on their digital economy development so that's everything from digital equivalence of documents digital identity right through to what we'd be talking about um today on the industry side had the great pleasure of working with many on this uh on this panel global digital finance as well as the wharton group and world economic forum on some emerging issues including defy um and gene what a lot of fun it is so very much looking forward to the panel and uh i'll hand back to you again thank you so much for this introduction after these introductions uh i'm looking forward for for you to share your experience your views to compare those those views from different regions and approaches from different regions so let's move on to the topic well i believe myself that we are at the tipping point from the regulatory point of view the developments in crypto asset space and the level of interest from investors and market participants triggered a lot of regulatory scrutiny and activity and given the speed of this technological development as you have mentioned in your introductions regulators have struggled to keep up and maintain a unified and consistent approach so what we have at the moment is a piecemeal approach of divergent regulatory responses and approaches with only a few leading jurisdictions uh with only few reading jurisdictions taking a proactive spay is steps and many many majority of the countries are still passive and taking wait and see approach the task of regulating cryptoset is enormous and this phenomenon is is quite new as much as the technology on which it is based and it has risen from literally nothing to in just a few years achieving market capitalization of cryptocurrencies alone exceeding 2 trillion as of today and let's not forget that crypto asset is much broader than cryptocurrencies alone so in the absence of this off-the-shelf regulatory framework precedent or ready regulatory architecture for crypto assets the quest for an adequate regulatory design for crypto assets is ongoing around the world there are many concerns and interests at stake some are incumbent some are entirely new and some are in jurisdiction specific but let's not forget that dlt is inherently borderless so global and cross-border perspective is also very important so before discussing any upcoming and ongoing regulatory initiatives i would like to ask each of you where where are we today where you are in your respective region in terms of crypto asset regulations and what are the industry needs and expectations and do you think that current regulatory design is fostering or inhibiting the innovation in crypto asset space so maybe we start with nina again all right yeah happy to uh to give an outline so in in europe basically um what we have aligned for quite a while is the european-wide securities definition in mifit market in financial assets directive and uh or instruments directive and um that applies throughout but that only um resulted in a very limited harmonization because um it's a directive it's not directly applicable in the nation states of the european union hence um every jurisdiction implied it internally uh within the the boundaries set by the directive as they wished so typically what we see is that jurisdictions add further types of securities um and further prospectus requirements beyond the ones that are required on a european level so in the end in order to be sure that you don't issue a token uh which results in a security issuance in europe you needed to check all countries um that uh i believe um yeah uh will maybe not be picked up that quickly but we'll get to that i think a little bit later we we are seeing a new proposal for other types of crypto assets coming up called the mika market in crypto asset regulation in addition to that looking at germany specifically we have a very tight regulation um bitcoin and other native tokens had been financial instruments already since 2013 i believe or 14 so for quite a while they are captured by the overall financial regulation so if you want to offer any type of service surrounding uh crypto um currencies uh then you needed a license uh already in germany for a couple of years now and that had been broadened um at the uh beginning of 2020 um from uh cryptocurrencies to what we now call crypto assets and that basically involved every asset that can be traded to make it very short and simple so everything that is tradable is now captured by that financial regulation and is according to german law and financial instrument so that's quite a very narrow space and also the reason why the most startups even if the teams are located in germany tend to offer um you know their ventures abroad thank you nina so we are in europe fragmented at the moment as of today and uh due to these divergent divergences not very conducive environment for innovation and some of the jurisdictions like germany took a very proactive approach but also very robust as you say and quite restrictive thank you very much how about atina can you share your view from the uk outside of eu i'm sure so now outside of the eu as of uh this year um so i i think um there are still some hangover um policies in place that when we were part of the eu um were implemented and a number of those surround kind of payment services um and e-money for example and those types of um regulatory guidance still align to eu where i think we're going to start to see some divergence is in comparison to as nina said micah the market in crypto asset regulation which i think on a positive side will bring together all of the eu under one regulatory regime however there will be those jurisdictions that have transposed um guidance that exceeds micah like germany or france and i think it will be interesting to see how that plays out as the consultations um are debated in the european commission um but there are some likenesses between the uk and the eu especially around stable coins so um the uk's uh just undertaken a consultation on the treatment of stable coins and and bringing stable coins into the perimeter of e-money and today they kind of sit outside of the very very loose guidance given by the financial conduct authority which classified tokens in three ways um pretty similar to what you see in other jurisdictions so there are payment tokens which would be bitcoin and ethereum um security tokens which are covered under securities laws no uh you know news there and then utility tokens which are still kind of this gray area um and stable coins were kind of not really considered um and then they came out a year later and acknowledged that they existed and that further guidance would need to be undertaken to provide some some um a road map for how those would be treated and so that's what we're seeing now um as a result of amld5 um again going back to directives need to be transposed into law by the countries and so they don't always show up in exactly the same way in every country in the uk this resulted in the financial conduct authority putting in place a registration scheme for crypto asset firms um so this went into effect in january last year um firms had until january this year to um register and the fca was meant to um they're not licenses but but grant the ability to continue to trade um by january this year unfortunately the fca was expecting something like 80 applications and they received well over 200 and they just weren't staffed or prepared to address all those applications so unfortunately um they had to issue some additional guidance saying okay we're going to put in place a temporary register and everybody in the uk that had registered previously can keep trading but nobody's authorized yet so i think they've authorized three companies um out of that 200 and we now have a new deadline for july so what that's meant and there's a number of other things that are ongoing um around bringing advertising for crypto assets under the existing financial services promotion whether they're regulated or not which is um a very confusing um proposal and requires that firms need to have their advertising or any marketing of any kind really or customer communication signed off by a fisma regulated firm but there are no fisma regulated crypto asset firms so we're not quite sure who's supposed to sign off on that a little a little bit difficult um so in the moment in the uk everything's basically in a halt we're just kind of frozen um and that's had a real commercial impact i think on those businesses who either set up in the uk or who operate cross-border obviously so um it's it's not a super great situation thank you very much tina so what i understood is a lot of uncertainty some hangovers from the eu era but also needs of industry that exceed the capacity of the regulator to 100 okay thank you very much tina for this uh how is the u.s looking in the in this landscape given that you yourself is are a landscape of different states so i would say this is probably a common statement about the us which is it's complicated right um while in certain other jurisdictions sometimes we can get a clear and simple answer um with respect to whether something may be permitted or even whether it may be regulated or not or outside of the regulatory perimeter certainly within the u.

s i think of it more as like a spider web and the idea that something would not be subject to some kind of regulation is is kind of um i was going to say a foreign thought but i but i don't mean it i don't i guess it's kind of an unintended um double entendre or something but um yeah it's it's not really you know things are regulated and while you know people say okay we're not regulating the merits of technology certainly maybe the merits are not but the the other aspects seem to be in many respects particularly in the digital asset space and sometimes the way the regulations are applied or interpreted um or thought about even informally um obviously i'm not a regulator i can't speak on behalf of regulators but just in discussions with certain regulators some of the concerns are quite different for example with the same regulations such as red s right for sales to those located outside of the u.s than they would be if you were selling equity you know via guest so you really need to if you're planning on you know transacting in the u.s often it's good to either speak with regulators with your counsel or speak with counsel who frequently are speaking with regulators you can think about you know how things are like what the hot buttons are but what i would say um to go back to the question of it is it it is it's complex because as i'm added inventions you know there's the federal level then there's the state level and then we don't have a single regulator that has jurisdiction over digital assets generally you've got the sec right and you have the state securities regulators you have the cftc right for commodities and then you have state state equivalents for for commodities regulation and then you have um fincen at the federal level uh regulating digital assets of their money and then you have state level licensing so while you might say okay i'm going to register with fincen at the federal level you know there are actual licenses for many of these states and some of the states take longer than others there are certain states that don't consider digital assets to be money um but you know there's there's a lot in that way and as as has been said previously i'm sure you know if you look at the irs you know there they see digital assets as property different types of property so um there's a lot of complexity and i think sometimes when when trying to know whether you can launch into a launch a project or expand a project into the us or to reach customers in the u.s it it can be a time-consuming process and i'm not discreet for it as you might hope so but what i would say is i i have great faith and um in our regulators and i realize that everyone is trying to get to actionable points um there there has been a lot of progress but just for those who are watching who are contemplating a project in digital assets it's definitely um it's a complex inquiry thank you george so we have a complex landscape in the u.s and it looks like it's it's it's becoming more and more complex as we go along so let's see if we have a better news from uh from ursula you you could use could you say something about your region australia and hopefully more broadly asian media yeah let's talk about asia so uh yeah look everything's streamlined everything's consistent it's all one market no it's every single market is different of course uh and look we have everything from uh you know complete outright bans that were introduced in mainland china in september of 2017 right through to very sophisticated uh regulatory regimes like the likes of uh japan for example uh we have some jurisdictions that are really trying to leap ahead and you know really i think put a positive spin and be attractive to the virtual asset sector and i would certainly push singapore in that time in that sphere particularly because it's introduced quite a comprehensive regime but also signaled quite a strong uh you know uh welcome uh to the industry uh you know the market that i know uh and uh and love hong kong uh you know has actually been uh one of the most interesting markets because it has attempted to apply regulation a bit sooner than it was able to put through uh specific regulations to regulate uh virtual assets and it's a really interesting case study particularly in relation to what's proposed for hong kong so what happened uh is in hong kong uh the securities regulator proposed an opt-in regime whereby exchanges could put their hands up have at least one security token in their mix and then be subject to the whole uh suite of regulations that the sfc had implemented and uh they would submit to that um regulation for all of their assets even those that were unregulated and what that achieved was it really provided a pathway for uh those who were really seeking to to to to obtain that imprimatur of regulation on their business uh and and to provide that pathway for the regulator to really understand uh the sector and so it has and it's issued a lot of guidance for brokers uh so securities brokers that also want to be involved in virtual assets fund managers that also want to have uh assets within uh their uh their pools uh in the virtual asset sector um and so it's it's grown as quite a sophisticated regime but still not comprehensive and what's interesting is that under the pressure of what's happening internationally the pressure of uh you know the of a fat f which looms over every jurisdiction worldwide is that a new regime is proposed and that regime is interesting because it will cover a range of services providers but importantly what's proposed is that retail would be out so that the whole virtual asset sector as far as exchanges a number of traders would be concerned would only be able to serve professional investors so you can imagine that's incredibly contentious uh within hong kong and we'll we'll see how that bears out uh and particularly uh the signals there that it's just initial um but we're already seeing fat f uh assess jurisdictions as against those recommendations philippines was one of the first and quite severely judged as against implementation of the travel rule and i think some of the comments made earlier around readiness are really important because in that case it's technological readiness tina spoke about regulatory readiness you know we see cues in singapore of licensed applicants you know very very long and certainly in certain markets a prioritization of incumbents which is not great um but what i would say is that we in asia had a number of uh let's say uh regulatory refugees out of uh places like north america uh where the regulatory regimes were so uncertain that we had law firms that were unable to issue opinions in writing they would only provide guidance over the phone we're still encountering working on a project with 57 jurisdictions at the moment a number of jurisdictions simply cannot form an opinion as to whether or not a particular asset is is regulated or not and so i would say that you know when we talk about regulation as a hurdle it's generally an enabler in my view and certainly provides confidence to business um particularly when there are pathways that they can speak to regulators and uh and and josh has spoken about that uh but also just to understand where they where they uh you know they stand the other theme i was going to raise is cross border you know so so the fact that these uh you know businesses are generally online uh covered means that more and more you know or less and less uh you know we're traveling you know fewer boots on the ground um so to speak um and so the rules around uh extra territorial application um are incredibly important at the moment so a lot of the work that we're doing at the moment is really helping companies assess their risk uh when they post uh you know advertisements on widely used social media uh without targeting necessarily a particular jurisdiction but that whole offering landscape is completely different uh than it used to be um and then the final thing i raised is that i think one of the misperceptions around asia is that it's behind in relation to digital and uh that couldn't be further from the truth a number of markets really see uh digital as being a pathway to leapfrog traditional phases of development uh so you know the likes of thailand incredibly sophisticated digital equivalence legislation recognition of smart contracts and number of markets really embracing uh security tokens and recognition uh you know of non-paper-based systems so i'll pause there but um yes certainly certainly a lot to talk about in asia well thank you very much rasulullah so uh what do from what you were saying is basically that the regulators now are focused for for this or another reason some for some it was the libra project that was a wake-up call but the regulators are now focused they they sort of acknowledge the potential and risks of this this new technology and crypto assets and there are some initiatives now coming being worked on and developing as the one in hong kong that you mentioned so maybe we stay with you just for a moment and that question tool to all of you as well where is it going so what regulatory activities are ongoing and how is our regulators in your respective regions addressing all those uncertainties or planning to address all those uncertainties not that now that we definitely know that there are uncertainties and difficulties so are there any other any initiatives worth mentioning on that front from from from where you are yeah look i would just mention that you know that the general approach is staged uh so i think all regulators acknowledge that there is so much in this sector that they cannot address uh today uh you know and examples would include decentralized exchanges uh a number of d5 platforms automation generally and we're starting to see that as being front and center but we certainly see a staged approach and so i think most regulators recognize uh that they can't uh bite off and address everything uh just yet i also think that we are starting to see a recalibration of understanding of risk and perhaps a more discussion about what risk that you know it is actually looking to be addressed uh and one of the potential downsides of of taking a very stringent approach uh as against issues like privacy for example and uh of course the cbdc uh marches a you know another uh issue that is bringing that to a head okay well thank you very much uh ursula and george do you see any any initiatives on the regulatory front especially on the federal level to harmonize this this u.

s landscape coming forward so i'm not sure about harmonizing per se but i i do i would say that there have been some joint statements that have been made say by the sec cftc and fincen for example um essentially as i see it with the goal of saying look regulations cover this stuff so um something is going to regulate these uh these digital assets and digital asset transactions i do think also um at the federal and state level there's a lot of um there's a lot of interaction for example um recently uh in i believe the matter was called two oceans um but but i'm not i would i'm not exactly sure of the company i think it's tuition where the state of wyoming had said hey we believe that this is a qualified custodian and then shortly thereafter within two weeks the fcc um noted that well you know that that's a state level consideration at the federal level we're still considering and by the way here are questions that we have that we need to to hear about that we're still gathering information about so i think there is a high level of interaction um between and among regulators i also think you know in some cases there is federal preemption of certain types of of regulations and and in other cases there isn't right so um i don't think that we're going to see harmonization per se but i i do think that um the message that's coming out or that that seems to be coming out is just bear in mind you can't just look to one regulator and think that i mean even i'll give a practical example without giving away any any client information but you know in speaking with for example fed up there have been times where they've said okay so what are you going to do about your kycaml responsibilities and things like that and yes that's a different regulator right but they're all thinking they're all um speaking together and um at least that's my understanding i'm not a regulator oh and nothing we found this panel is legal advice or investment advice thank you very much thank you so tina i think we can now move on and and talk about what you just mentioned that we're gonna see some divergence in the uk so it's an opportunity in a way for the uk to distinguish themselves and gain a competitive advantage what is coming from the uk on that front well you are 100 right and um this is the message that um industry bodies like crypto uk um and to some degree you know with support from um the likes of blockchain for europe and the global blockchain convergence i'm on their steering committee there's a number of industry bodies that are suggesting to you know uk plc that this is a time that we could potentially put in place um much like singapore a environment that um welcomes in a in a risk assessed manner um crypto asset firms to come to this jurisdiction um you know we're a major market jurisdiction where the fx capital of the world and it is a financial epicenter or a hub um globally and so we're well positioned especially as a fintech hub to be able to and we have the right talent we have you know the right payment structures we have open banking here there's so many ways um that the uk has really left ahead in digital finance and we seem to be kind of at this impasse around crypto assets and this is the time to really exercise and utilize the independence that we've you know just demanded um and and use it for good unfortunately at this point i feel like as as we touched on earlier we just aren't quite aligned across the number of government bodies that contribute to to financial regulation here so unlike the us um we don't have this kind of spaghetti framework of the state and local level plus different regulators for different types of assets we only have one financial uh services regulator however um they received their mandate from the treasury department um and the treasury department receives their mandate from parliament so if you're trying to implement regulatory regimes or frameworks and you essentially need new legislation passed to do that because this is trickle-down structure that's going to take a long time um so what we're trying to do is work within the perimeters that we have now um and really start to um educate uh the potential opportunities for how risk could be mitigated um ursula mentioned something earlier around um you know kind of the incumbents in the industry and so when i say incumbents in this context i mean some of the the bigger or greater longer established crypto asset firms um almost being approached like well they're so big so we need to do something about them and then that has a knock on impact on competition and innovation for some of the smaller or newer entrants in this particular market just kind of being kind of sat on a stool saying we'll wait we'll get to you when we get to you and that's not necessarily a fair and competitive playing field either for those for those companies um so that's a bit of a challenge and i think the third thing is that we're still part of the you know global financial ecosystem and things like the new fat f guidance being proposed some some changes to the way they're expecting um firms will be compliant with the travel rule there's a lot of cross-border issues there there's a lot of interoperable technology issues there um as well as the ever increasing uh growth of the list of who fat f considers to be a virtual asset service provider um now extending into potentially uh self-hosted wallets and technology companies they were completely out of scope before um and um companies that are that are operating decentralized finance type of services and what thoughtf has said is that there's no such thing as decentralized finance and that if somebody is able to undertake a financial service someone must be giving it to them and so when you when you kind of look at um the the lens of the layers of challenges that we have around identifying the the risk for the regulator being able to demonstrate how we would mitigate the risk um and then you keep adding all of these additional things on like oh we're just gonna put stable coins into you know the e-money uh regulation and then we say okay but there's a lot of ways that these types of tokens don't operate in the same way that e-money does um it does kind of feel like a bit of a stop and start um and so you know i i personally believe that this jurisdiction does have a lot of talent and a lot of investment that has been made especially into the fintech sector and it would be exceptional if we could leverage that to become an industry leader and i would point to singapore as as one of those jurisdictions that that seems to be doing a really great job well thank you very much tina a lot of opportunities but also a lot of challenges as you just said and so many issues that you all have mentioned i'm really sorry that we won't be able to talk about all of them but some of them are really really interesting and topical happening right now so i left nina at the end with into the in this round to talk about our mika and our and you know unprecedented regulatory effort of on such a jurisdictional scale to come up with this uh bespoke prescriptive and detailed regulation can you tell us more about that nina yeah let me ask a little bit more back with the history right so we started a couple of years ago with specifically the smaller eu countries starting to develop their own regulatory regime towards crypto and tokens and so forth so gibraltar kicked it off then malta stepped in and liechtenstein ultimately developed a quite sophisticated approach maybe a bit more on the civil law side than not only on the on the regulatory laws side and obviously switzerland not being a part of the eu but you know being geographically in europe had always been a frontrunner with their regulatory and also tax regimes and very approachable officials uh where you could discuss uh approaches and projects in advance and so forth so we saw you know uh an increase in splintering of regulation and obviously you know coming with that um the a lot of option to do regulatory arbitrage within europe and that ultimately resulted um to the firm belief that there must be a european regulation and not only in form of a directive which then nationally needs to be transposed um in in various ways but uh really to start right away with a regulation which is directly applicable throughout the eu and that resulted in the digital finance package to be published by the european commission in september last year which has three components which is the uh dora the digital operational resilience um regime then the market in crypto asset regulation and then another piece which is called pilot regime for the use of glt in capital markets which is restricted i must say right away to the financial services sector already holding licenses and does not include any startups currently not being part of the regulation and the market in crypto asset regulation um was not built by looking into blockchain and dlt as such and then you know trying to get your head around how to sensibly regulate it but it was rather built uh within the niche that is left by the me fit the market in financial instruments directive and the payments directive and um the the e-money um regulation and because nobody dared to touch these existing regulations so what they basically did is taking a look at okay what is left over by all of these regulations and and the crypto that fits in there that is regulated or that will become regulated by the me card that ultimately results in something that does not feel a natural fit to the topic to the subject that we're talking about here which is kind of unfortunate i do understand you know the political uh limitations right but it will not result in the ideal regulation it is basically a copy and paste work from the me fit uh you know squeezed over um you know crypto assets and um you know content wise maybe to mention it distinguishes between different types of crypto assets and there is specifically a very high regulation for stable coins and that was you know obviously driven by the fear of libra dm um to be imposed on on europe and there was a strong will to give a push back on that development um but that will also you know uh push back other maybe more favorable project so it's it's not a very um yeah it's a it's a very strong um regulation trying to bring everything under the hat of financial regulation so josh you will know this right the sec also had always a very wide approach to everything and that seems to come to europe now um as well well there is um [Music] a strong conflict that i also see um tiana you mentioned that uh between the privacy regulation and the anti-money laundry regulation both regulations have been developed you know within their silos and it's it's really difficult to you know navigate between those two so i would really wish that the regulator would also take a look into uh that and then obviously gdpr sets another line so um yeah we are really in the middle of a circle of tons of of regulations and um yes it's not made easy for startups um these regulations are basically built upon the approach as you also said tiana that um there is no decentralized uh service offering they will all require a centralized uh provider for such services and i think that's something that really needs to be discussed more openly is when is something actually decentralized i think we cannot ignore the fact that the technology by now may actually permit something that you could truly call decentralized although i want to say that a lot of projects out there are if you really dig deeper not decentralized although claiming it yeah but i think there is by now uh something that you can call decentralized and that maybe provide uh a common good right which is even desirable for us as society so i wish we would take a closer look at that right more concentrating on what are the opportunities and and how can we bring them forward and currently the main part of the regulation is is really concentrating on pushing back on crime money laundry and fraud um so yeah a little bit movement to the positive aspects would be great so and again can i just add one quickly um on the back of what nina said so i think nina brought up two great points um and i just wanted to to provide some specifics around them so the first is gdpr um we've got cut and paste regulation potentially and then we've got existing regulatory regimes around different types of activities right so how does one comply with gdpr in the context of the fat f travel role like that nobody kind of stopped to think about that um and the two just don't fit neatly together so that's that's one example um and then the other example i would give is the um decentralization and the eu's um really trying to kind of stop the development of some stable coins in response to you know as as we know projects that were being announced that they had a lot of fear with um but within mica um a decentralized algorithmically generated stable coin will be in scope with all the other stable coins and so you think well how's that gonna work but um because you've got this cut and paste you know it's kind of like oh we'll just figure that out later because we're just gonna make this one regime um and i think that that it we're starting to see um practical evidence of cut and paste just not being fit for purpose thank you very much tina i think both you nina and eugene i have raised quite important points here and partially you know you started responding my next question and my next question and i think we should finish with that we have five minutes left and unfortunately not much time to answer questions from the audience but i think if we answer this last question some of these questions will be addressed given that you have you are seeing from your daily daily work and on the ground with the clients and you see the difficulties with regulation you speak with regulators you see what challenges they face what would be your recommendation like finishing on a positive side what opportunities should we take what recommendations would you have uh and how ideally you think regulation of crypto assets should look like you know maybe us you could start from the from this asian region which is so dynamic and actively working on the regulation yeah look uh so let me put forward some ideas and i'm sure there'll be others but look you know there must be space uh for creation and for experimentation we're already seeing the impact the positive impact uh on the innovation of the financial sector uh and the broader digital economy from uh from blockchain so that space uh is incredibly important uh and so i think preserving uh that as a principle of regulating that space uh you know remains uh very important uh likewise uh making sure that we're thinking about um those other areas that need to be considered and balanced and you know privacy is the prime example um the third is really to draw upon analogues and not necessarily the just the cut and paste as tina mentioned uh and this is true you know no more you know than anything else that you know for then defy so when we look at d5 you know we really need to be thinking beyond uh the examples from financial sector regulation and looking at how uh the law responds to uh software development generally uh and already we have uh you know established precedent of uh the creation of hacker software for example and drawing upon principles already in criminal law around complicit actors that are closely involved and support the end purpose of particular software we also have examples beyond uh even sort of software and financial services and we need to really think about whether or not we're trying to get to a point with software uh that we have with opium poppies for example where you have everything from the seed to the farmer to the distribution so highly regulated because of the possible positive and negative uh purposes of that and i think that's where we get into some pretty significant differences in our philosophies regulatory philosophies policy philosophies around the world uh and uh and that's where things uh do start to move apart but what i would say the recommendation is just to engage you know to absolutely be unpicking um and to be thinking not just about the immediate uh you know a hammer uh to try and squash something that's a perceived risk but to look uh through to the future around what the end state ought to look like and what a safe uh and what a a positive and an innovative digital economy looks like thank you very much josh would you add anything to that from your own recommendation i think and this perhaps is a an obviously u.s centric sort of view i think one of the challenges is just um and ways forward is to try and rely less on on speeches and on um informal guidance that then can later be disclaimed or otherwise changed i know it's it's helpful in that it can get something out quickly um but certainly certain buzzwords that have popped up um for example the use of and and i'm not saying buzzwords in it in a negative way but just in a way that says like it's unclear then how you use the terms that are said so for example if we look and not being critical of of regulators or anything like that just thinking back to hinman's speech a few years ago about whether whether ethereum whether present day sales of ethereum or sales of securities when he talks about using the one term sufficiently decentralized he used it one time right and then what does this mean how important is it and then when we got the the framework from the sec and all of those factors how do you apply them right and are we still applying them and when you enter into discussions with with finnhub is that what's being applied is is there some different standard that's being applied um and as you may know i'm just in the past day um hester purse one of the commissioners released her um token safe harbor 2.0 which provides you know a potential framework for for safe harbor for token issuers and you know by extension the trading platforms that would trade those those digital assets um and it's it's well thought through you know the the proposal how it will be included with the discussion um and the framework and all the other kind of informal guidance that has been given by um by for example the sec staff which again is helpful and if you sit down with vinhub and discuss things yes you can get practical answers but i think um having as as tina as ursula as as everyone as nina and as you again have have mentioned you know having a more comprehensive view when you go out about how will this work and what is the next step and then what is the next step after that i think what we've what we continue to see and if we think about say etfs crypto etfs right still asking questions and still trying to ask questions to get more information and um i think at a certain point you need to have not just statements made that help clarify things but things that that you can actually you know hook your anchor to you know um and for more clarity more clarity thank you i liked how that was released on github uh josh was very innovative in terms of consultation uh on that uh safe album yeah and thank you to tina for um for flagging it i think daniel is trying to tell us something have we run out of time you still have a couple of minutes if you want to a bit late okay so i would like to ask tina and nina for the last kind of recommendations to finish off on the positive side what how do you see this going forward for this to go well so i i have um three things that i generally point to so the first is when we look look at what's working and we mentioned japan earlier japan does have quite a sophisticated regime now and a way to oversee that regime that no one else has had the confidence to adopt and that is an sro model so that sro works with the regulator in japan very closely um and the industry is always going to know before the regulator does if something's going off the rails it's just the way it is this industry moves really fast so you know some form of even if it's just a feedback loop i think you would increase people's understanding of what's going on you would be able to react faster and and there is an element to self-governance where you're kind of shaming each other and nobody wants to be the naughty kid right the second thing is sandboxes so going back to um commissioner pierce's proposal this is the second time around for this thing i'm really hopeful that some element of that gets through because there is a real opportunity to have a test and learn in a in a safeguarded environment that says okay we're going to let some of these things run um and we're going to determine who can access them or what but we're going to really test it live and then be actual to assess what the risks really are instead of kind of predicting what they might be and then i think the third thing is um some regulators like a rules-based regime some regulators prefer a principle-based regime and they both have pros and cons so if you have a rules-based regime you break the rules you know what's going to happen if you have a principles-based regime they they tell you what they kind of want to happen at the end but they don't tell you how to get there um and i think with this rules-based regime they have this in places that they can kind of get you right they like hold it over your head and then the principles based regime it's like oh will you tell us what we should what we should think um i think it would be fantastic if we could kind of combine those a little bit so that there is context um because just enforcing by by rules um and by fines and sanctions doesn't work telling people to figure it out for themselves doesn't work so let's try and creativity collaboration and creativity on the part of the regulators thank you very much tina last word to you nina yeah thank you very much i would like also to point to another um important topic that is still missing in their space and that is real reliable digital identities right so that is one piece that uh all the nation states really actively must work on um to solve that issue because otherwise we'll never get to all these wonderful you know um arguments saying um something is democratizing something right so currently the whole blockchain dlt space is not democratizing anything it's plutocracizing everything right uh democracy is one man on boat and not um one token one boat um so i think that's really really important then the second thing is i would really like to invite the regular regulators and politicians to take a look at what potential public good decentralized systems could deliver to us as a society and to get their heads around what they believe the minimum requirements could be for such networks or systems to be acknowledged as such a desirable public good right and then to create i don't know some regulatory reliefs tax reliefs acknowledge them as charitable whatever you know take um the opportunity to take influence by giving incentives um rather than only you know punishment and threat um to positively influence the development in that space i really miss that our regulators and politicians are taking this opportunity which is well at hand and you know i think we could achieve a lot um by adding that to the current regulatory approach so less fear-based approach and more open-minded uh open-minded approach collaborative and uh forward-looking approach thank you very much to all of you for this wonderful discussion i wish we had more time to discuss some of these issues that you have raised but we've already talked for over an hour so thank you very much for taking your time it was wonderful it was a pleasure to talk to you all today and thank you to the audience for participating sorry we could not have answered questions specifically but i'm sure it's not the last discussion of this topic you