EN | Legal Track | Main differences in the US and Europe approach | MERGE Madrid 2025

Great. Uh well, thank you everyone for coming to this uh this panel on uh as part of the legal track of merge. Uh we're looking at differences uh and similarities between the US and EU approach to digital asset regulation. I'm Andrew Wworth. I'm an executive and residence at GDF, Global Digital Finance, the Global Trade Association for Digital Finance.

Um with me are two great panelists. Do you want to introduce yourselves?

Yes. Uh hi everyone. My name is Katina Vulu. I work at Noten uh as part of the regulatory and compliance team. Erh hi everyone I'm Pabloa I work at Freenta which is a financial regulation law firm just only focus on financial on financial regulation and very happy to be here.

Great. Well thank you you both. Um so obviously this is a a theme which a lot of people a lot of uh a lot of different panels and and events are talking about here because it's it's fairly relevant. uh hopefully we can say something a bit new about whether not just which is good which is bad but how do they compare how can you do business across both um and also the rest of the world. So to start off Pablo maybe you could um just lay out the groundwork of Mika what that looks like in the EU the regulatory framework here and maybe some easy comparisons with the US.

Yes I'm going to introduce a little bit what is the MA framework about. So first of all MIA is divide like we could divide Mika in three main parts. the first part and this is a difference between Mika and the Genius Act. This is the like the first difference between Mika and the and the and the US framework. Um Mika sets the crypto assets that are under their scope.

So we have we find three different crypto assets. we find other crypto assets and then the stable coins which is the asset that I think we are going to discuss more because the genius has the genius act is more focused on stable coins and the issuance of a stable coins and the first difference here is that Mika divide the stable coins into two assets the e- money tokens and the asset reference tokens while the genius act doesn't do that do this the genius act only regulates the stable coins as a medium of payment and does not divide or establish different requirements for two different types of a stable coins. So this is one of the main difference between Mika and the junior sack. Then Mika the the second part of or the second main part of Mika establish the rules of conduct and licenses that the issuers has to apply and follow to issue an stable coin or another crypto assets to uh elaborate a white paper follow some rules of conduct h have vulnerability on your board blah blah blah blah blah and well this it's really complex and it's different for each kind of crypto assets. And then the third main part of Mika establish the licenses that you have to apply and the rules of cond of conduct you have to follow to be a service provider of these three kind of assets.

So if you want to provide services uh to intermediate to uh provide custody uh within these three type of crypto assets, you have to follow this the third block of Mika uh which set up the the licenses you have to apply and the rules of conduct you you have to follow. So I have talked about one main difference but I uh well we think I I think we will discuss more about the stable coins difference because uh the rules to issue a stable coin is the genius and mika follows the same principle but has different requirements for the issuers. So

Oh thanks a very helpful sort of overview of of mika and the key differences. Katina, do you have an opinion I mean either of the European Union's approach to to regulating it either through Mika but also more widely around AML uh regulation and things um and particularly perhaps around the question of competitiveness because we often hear that the EU is uncompetitive because of regulation. Do you agree with that or what are your thoughts? Uh so the EU took a very bold step in being a pioneer in establishing a comprehensive regime for digital assets and I I think that was definitely the EU marking uh or uh essentially marking it its position as a competitive market and uh assuming a position of leadership for this industry globally. Uh so I definitely think that we took steps in the right direction to assert uh or to secure competitiveness within the EU for for digital assets.

Um of course the the nature of the union makes it uh difficult for for us to have a very strong and unified um external position uh around digital assets and other topics. We're a union of 27 members. Uh that's not a bug, it's a feature. It's uh our diversity is our strength, but it's obviously much harder for us to even go to market with uh a policy strategy around digital assets the same way that the the US is able to do uh because they're able to go to market with a more unified uh policy position around it. Uh but I do think that the fact that we uh unlocked regulatory clarity, we're a few steps ahead of the US.

It's important to remember that the Genius Act was just passed into law very recently. It's not in force yet. Uh so I think a couple of years ago when we were discussing Mika, the environment was uh a lot more focused on the excitement of unlocking regulatory clarity. That's what we're seeing in the US now. And now that we're, you know, struggling with the pains of actually putting it into practice, we we, you know, are confronted with the with the complexities and the difficulties.

And we probably will see that happening in the US as well. So we're we're kind of in the the peak of the hype cycle for the regime in the US and uh and in Mika we're struggling with with the pains of operationalizing all of this. Um so so so I would say that we unlocked regulatory clarity that is definitely great for competitiveness and for business. I think it's palpable also seeing the amount of banks and traditional financial institutions that we have in conferences like this today. I'm even wearing a a white shirt for for this panel.

Uh so it definitely is a business enabler rather than a blocker.

Yeah. In my opinion, I think that's very worthwhile to remind people about that that we're at different times in the policy cycle here. Also, that Genius Acts,

we don't yet know the rules that have come out of it. The Genius Act, just the first stage of the legislation, but then they're going also have to create rules. And I'm sure we'll see all the same conversations in America that we're seeing in Europe now around the specific implementation and the details and what that looks like. I think that's very powerful and very helpful to move on to the next sort of topic I'd like to ask about which is the kind of concrete um day-to-day experience of firms in Europe or in the US uh in dealing with this regulation. Um Pao obviously Fin um helps firms with their applications for Mika licenses and I'm sure more widely

what's your experience of dealing dealing with with it like on a day-to-day basis concretely? We have been helping the the companies uh not only from 2024 which is the year that Mikaya entered into application. We've been helping these firms because there are a lot of cryptonative firms that wanted to be regulated before they enter into application of Mika. So with the first draft we were already working with this kind of of films to set up this governance requirements all the policies etc etc and uh it has been quite surpressive the amount of companies that are willing to apply for AMA licenses. Not only the cryptonative uh businesses but as you have said also the traditional finance companies, financial companies as banks, broker dealers etc etc that had a h have a simpler has a simpler regime because they they they apply for a license with a notification regime and there is a lot of banks here in Spain.

You have heard I'm sure you have heard about Kaisa Bank, Kucha Bank, Tea Bank, Santandere, BBE, which also has announced that they are going to issue an stable coin next year. So, uh, it's it's been more difficult for cryptonative companies because they have they didn't have this knowledge or this regulatory knowledge because we always we always say MIA is like the brother or the little brother of MIT which is the regulation or the directive that regulates the financial market. So the financial instruments and for financial institutions or traditional financial institutions has been easier to adapt to this kind of rule because they already have the the the knowledge and the and the and the knowh how on how to draft policies, how to um be transparent with the client or how you have to be transparent with the clients. So uh also the the all the behavior with the with the regulators and all the stuff and for the crypton native uh companies we have a struggle like a lot but finally they are like already in the regulated world and they have their mindset also uh very clear that you have to comply and this is good for the businesses to have an armonized framework and a competitive is framework in which all the companies have the same rules. We have some difference and we have had some problems with another members state members at Katarina has said with Malta CH because that always happened but they are already really in to the regulated to the regulated framework and they are willing very much to comply with the regulations.

Yeah. And for everyone else it's lucky that they have you at FINRG to help them with it. Yeah, somebody's got to plug you. Um, Katina, maybe moving slightly away from Mika like core towards the travel rule which is obviously something global. How have you seen Europe's implementation of that?

Is that different to other regions jurisdictions? Is it helping firms do business?

Uh, so yeah, the the EU rollout is definitely different. Just for context, I work at Notven and one of our products is a pre-transaction authorization platform that helps businesses comply with the travel rule. Uh so we've been supporting the roll out of travel regulations in different countries for five years now. Uh and I always like to compare our experience with the EU throughout 2024 with our experience in the UK throughout 2023. So in the UK, travel pool came into force in September 2023 and we worked with the industry comprehensively to support the rollout of requirements there and we did the same thing for the EU in 2024 and the experience is definitely different and we go back to the fragmentation.

Uh so in the EU we're rolling out a regulatory framework across 27 member states, 27 different supervisory authorities. So it's hard to expect or or demand the same level of coordination. It's it's not going to be there. Uh so in in the EU we have this instrument of uh regulations which is which are directly applicable and are um uh as soon as they're they enter into force they become law in in member countries but they sound more they are more directly applicable in theory than in practice because even if they become law needs to be operationalized in countries. So for instance when Mik and the TFR came into force in Portugal we had no appointed uh supervisory authority for these regimes which makes the regimes uh not very operational.

So the the experience was definitely different and just to give you a a relevant data point. We conduct a yearly uh state of travelable survey to understand the level of adoption and and readiness across the industry in different jurisdictions. And the results of our 2023 survey after the roll out the roll out in the EU showed that 100% of the inquired companies in the UK uh were compliant with the travel rule. So they were ready to go. The the the implementation was very smooth.

um in the in the in the EU when when we ran ran the survey in 2024 70% of companies uh were not yet compliant with the travel rule and they I think the the most popular target date for going live was Q3 2025 which is well after the deadline. Um and this gives you a data point to establish kind of the contrast between our experience in the UK and the EU. And I think a lot of it is related to how the grace period for compliance was used in the different regions. So in the UK we had a very coordinated effort between regulatory authorities, industry and private sector bodies. They have an very interesting uh figure which is the joint moneyaundering steering group which is a private sector body composed of industry stakeholders and they are the ones drafting the level two guidelines themselves.

So they directly all depend for defining how the the the travel requirements in level one text are operationalized in the EU. The equivalent of that is the EBA. So it's a very top-down exercise that is led by an institution that doesn't yet have operational experience with travel rule in crypto. Uh so we end up with a set of um and they did engage the industry of course they created the tech technical expert group to advise them on the on the guidelines which I I I was a part of. They organized public consultations but um uh the industry never you know was never able to influence the text in the same way that the the the UK industry did through JMLSG.

Um so yeah I also think that um putting the industry uh in charge of defining how these things are operationalized uh is very important. Obviously the GMLG guidelines are then approved by Treasury. So it's not the industry defining self-regulating self self-regulating essentially but it's important to to to you know pass the ball to the industry to because the industry is in a better position to tell to the regulators how they are able to achieve these requirements in an efficient uh way. So so it's a very different experience and the EU has definitely been more challenging. I think it's very interesting particularly I mean because that requires a large level of trust between industry and regulators in a given jurisdiction right which it's interesting how that can change according to the different topics of regulation I mean clearly on the travel rule around AML that's highly um synchronized in their views uh in other areas even in the UK much less so if we move a bit more onto sort of international the international level international not comparison but you know we've talked a lot about differences or divergent treatments even of similar rules I travel rule which is originally comes from the international level do Do you see Karina any any areas overlap between the US EU or or globally speaking?

How do you see international convergence of rules and what that might mean for for business to operate globally?

Yeah. So I think Pablo already touched upon some of the equivalencies between for instance the the stable coin regime in Europe and in the US. Uh you you you said that we mostly converge on principles and then the implementation of those principles can be achieved through through different rules. But in general we'll try we're trying to achieve the same level of asurances. Uh I would say when you look at the technical requirements one topic that I think is interesting to consider here is the multi-issuance stable coin debates.

Uh so for context multiissuance stable coins are stable coins that are issued by uh entities in in more than one jurisdiction. So for instance, USDC which is issued by uh a Mika licensed entity and and a US-based uh entity. Um and Mika for instance gives it's arguable at least that it gives us the the building blocks to support the multi-issuance stable coin model in Europe. But now there's a lot of debate because there's a lot of push back from the European uh central bank and the European Parliament to try to ban this type of model because they're afraid that the protections afforded or the protections protections granted by the co-issuers third party jurisdiction will not be on the same level as Mika and they're essentially afraid of the risk that that creates that that creates and I think that concern is definitely valid in theory but I believe it's important for us to actually look at whether we have equivalences or not. Uh we shouldn't put too much weight on hypothetical uh divergences and gaps between jurisdictions.

We should actually assess where do we have equivalences? Where can we facilitate crossber businesses uh uh effectively uh and the US actually gives us a pathway to do that. So in the EU we we have this EDI debate that is putting uh a lot of pressure on Mika's credibility as a as a as a as a pioneer for or as a framework that is able to capture business to to to the EU. At the same time the Genius Act provides a very clear pathway for global stable coins to to be offered in the US. So foreign uh issuers can offer their stable coins in the US provided that they get an authorization and as part of that author they don't need to be licensed in the US.

They need a they need to go through a specific authorization process and as part of that authorization process Treasury checks whether the country where the stable coin was issued provides an equivalent level of assurances to what the the US is building which I think is relevant. Again, we're not in operational stage yet. So, this is what they say interiorly the in theory. Let's see how it plays out in in practice. But we do have a p pathway for equivalence which is one directional uh right now from the US and I think we should work on uh you know supporting equivalence uh equivalency frameworks in the EU as well.

Yeah, it's important to to point out that multi multi-issue is stable coins are not forbidden under

it's an interpretation

of the U regulators and Christine Lagard with who said this last week and it makes a lot of uncertainty as as you as you said to the companies because if something is not forbidden under Mika amend the law.

Yeah,

amend the regulation. But let's not make this happen without a regulation forbidding it. So that's

I don't know in the equivalence part the the ESMA and the regulators has a mandate to to cooperate with another jurisdictions and to assess the equivalence of frameworks but in then actually in reality it's very difficult or as I have um seen in in in different kind of financial instruments. It is very difficult to have an equivalence or to have the the CNB for example or the the the European regulation. Uh you see a a completely equivalence framework between two financial regulations as we can say that Mika and the union are because there is always something that differs. Mhm.

So I think we are not going to see

Mhm.

any passports of licenses between the US and Europe countries. If you are a US company, you are going to to to or you are obliged to establish a company here in the in the European Union and ask for a license for a mic license. And I think from my experience that my point of view is that we are not going to see any passports between us or third countries and

and the European Union. But that's from my experience in the traditional world

financial world.

I think you're right. I mean it's worth saying that Mika provides a pathway for international firms to operate in the EU. Now that's largely through licensing, local licensing, but it does allow it to happen in the same you know manner as as any other firm. regarding multi issuance table where I completely agree. I mean the ECB in my mind the ECB was asleep during MEA and now they're trying to undo it but too late sorry my opinion um in the last two minutes a very rapid answer from both of you where are the international organizations in this in the traditional financial uh sector we have you know BIS we have FSB we have all these u authorities whoever um creating standards which then get downloaded nationally and more or less create if not an equivalence framework then an equivalent framework um where people operate in do Do you see that happening at all in the crypto asset space?

Do you think we'll ever get these standards catching?

I can go first and um I I think for my area of expertise that is already the case with the um travel rule recommendations originally coming from FATF standards. They actually recently revised recommendation 16 to update uh the standards and to actually try to consolidate a bit more the interpretations of the standards across across jurisdictions because one thing that differs is uh so they allowed for instance for um for margin for discretion around the specific identifying information that institutions need to transmit with with transactions. they narrowed it down a bit. So that might help with the equivalence uh in system. So when it comes to travel rule actually the the uh national frameworks follow the standards imposed by the FATF.

So we do have a level of alignment alignment. We also have uh uh uh still divergent interpretations and one thing that um is particularly problematic is around the thresholds. So, uh, for instance, in in the US, you only need to comply with travel requirements for transactions above $3,000 US. In the EU, um, for crypto assets, uh, any crypto asset transaction is subject to travel regulations regardless of the amount. Um, and in the U you also have an obligation as a recipient of a transaction to receive information with with that transaction regardless of the amount which means that if the transaction comes from a US counterparty um

if it's uh below 3,000 there are very low uh probabilities that you'll get that information and then you ultimately need to report your counterparty as non-compliant to the authorities and so on. So the the the the divergence even even when the rules are informed by international standards there's still divergence that uh makes the oper operationalization of rules uh complicated.

Yes or no basel for crypto?

Yes we have the the v the b by setting the the the rules for the exposure of the of the banks on crypto assets. So they are working together and already h Europe has adopted those those rules h on the exposure for the banks on crypto assets. So there we have global cooperation but

banks again not for the crypto only for banks only for banks only for banks.

All right well we run out of time. Thank you both very much Katrina for your thoughts and comments. Thank you all for joining and uh see you around.

Thank you.