All right, Gunnar, why don't you why don't we just start uh if you could tell us a little bit about Monarium. Yeah, glad to do so. I'm happy to be here. Um Monarium, we are a company that issues e-oney on blockchain and we were actually the first company to get a license to do so. So we got the permission from the financial supervisory authority to do just that.
then is to say to issue uh e- money which is just digital cash and has been known for decades. It's what you have on your used to have on your prepaid debit cards for example. So we were just using this new technology to to do just that and it's of course programmable and you know has all the nice characteristics. Great. So um the topic here is uh Genius Act versus Mika and uh how they may affect uh stable coins.
So I have a few questions here that I'm going to uh put forward. So the first uh is that the Genius Act in balancing is on balancing innovation and stability and the Genius Act emphasizes fostering innovation in the US dollar dominance with a flexible federal state framework. while Mika prioritized a unified stringent approach for consumer protection and market stability across the EU. So, right out of the gate, there's some divergence there. Um, I've got a So, the question is, how do these differing priorities impact the global competitiveness of stable coin issuers and which approach better balances innovation with financial stability risks?
in your experience with uh being in the e-money business now for several years. Well, I think those are crucial questions for us and um before coming here I was I was more positive towards uh the genius actually than heard Benjamin Lens talking yesterday and got me thinking. Um this is a um this is sort of tricky. The um the main problem I have is that especially with Mika, you know, it's sort of put in place to to kill Libra at the time, which is, you know, for all the wrong reasons, but we were actually waiting for this unified regulatory framework to work within and then it came out and I think there are major flaws that there that have to do with um especially in Mika is the the the problem is as I see it there there are problems related to the fact that if you're non bank in this sector you have to put reserves into banks and then and then at the same time banks may become stable coin issuers so you are forced to actually put your funds into your competitors accounts and we know that you know with KYC and everything like that you you actually when you get into a business relationship with a bank you given them a lot of information about yourself. So I think that that there's a competitive issue there.
This is this is not fair competition and I think this will stifle innovation in Europe. I'm almost sure of it. Um and the that's one that's one problem and we can discuss this at length. The other thing is that both in Mika and in um in the Genius Act, no yield. For me, it's like throwing a cocktail party without alcohol.
You know, why why would you want to issue stable coins in a regulatory environment like that? But still I think you know I I still think that this also reflects some of the the differences between the US and Europe. We are maybe far too careful in Europe so to speak. And you know I have the I would say the terrible experience of having experienced the financial meltdown of the Icelandic financial system in 2008. And I would be careful to draw for people to draw the wrong lessons from that catastrophic effect.
But again, you know, I could talk about that for hours, but Well, it's interesting that you mentioned that because it's exactly what I was thinking. So, I was thinking about um 2008 is the what what what is the underpinning of crypto, right, which is too big to fail. we need to build something that's decentralized to get away from these uh systemic problems. And so I feel like you're starting to tread there. So maybe let's explore that a little bit.
Yeah, I almost get a twitch in my eye when I talk about this because after the financial meltdown in 2008, I was actually made the chairman of the financial supervisory authority in Iceland. Uh the previous board had left and there was no director. So it was really just uh yeah not a totally easy situation to be in. And the thing is that I think contrary to many people given that experience I think that stable coins if we have the right regulatory framework will not increase financial instability. On the contrary I think if we design it correctly it can increase financial stability.
And that comes back to the point I was making before, especially with Mic, you know, forcing non-banks to actually put the funds into banks while at the same time they can be competitors. That's a dangerous cocktail. I'm not going to say that the banks, you know, as I see it, you're feeding the gorillas. I'm not using the word dinosaurs because I still think that banks will have a huge role to play in all of this and I don't think we should look at them as our enemies or something like that. I think that just this is a financial system that is changing that banks will play a crucial role.
And why will they play a crucial role? Because you will need at least dur given the the current situation and in the foreseeable future you will always need fiat currency. And why is that? You know the textbook uh example is you need money to uh it's a medium of exchange. It's a measure of unit and it's a store of value.
But as long as you pay your taxes in your in your jurisdiction in the local money, whatever it is, you will need that money and it's a huge part of everything we spend. In my country, the the VAT is 24%. you know, so you always need fiat and you know, I just think we have to be very careful and we have to be very clear uh on how we see stable coins actually uh fitting into the the the the current monetary system and how that can actually increase financial stability rather than uh increase stability of the financial system rather than vice versa. Yeah. Well, thanks.
That that's uh really interesting. Um, so maybe let's uh pivot to like uh another issue. So there's basically two or three delineable differences between the two regimes. Um another aspect is consumer protection and adoption. So the Genius Act focuses on specific consumer protections like bankruptcy, prioritization, and AML KYC compliance.
whereas Mika imposes uh broader requirements including redemption rights and liability for service providers. So in your view, how do these differences affect consumer trust and the potential for widespread stable coin adoption in the US versus the EU? I mean, I would never say I was a specialist on that subject, but as I see it, and I may be wrong, you know, sometimes I'm wrong, those are like two sides of the same coin. Whether you want to protect the consumers directly or whether you want uh to go the other way around, you know, to to look at the bankruptcy laws, etc., etc.
I don't think it really matters in the end. What I think and and this is a point I'm I made regularly in in other forums is that you need reg just you just need regulatory clarity not just regulatory clarity but also and this I know from bitter experience you need a well functioning judicial system where you can take disputes and where you can get court decisions And it can't take too much time. Sadly, in my country, we are still having court cases from the 2008 crash. That's a long time. You know, it's almost 20 years.
That's not something we can live it. So actually re responding to your question I think it I think there's not a great difference there you know but but what is crucial is that the the the rules are clear and people feel comfortable in uh working in that space and they feel comfortable in using the products which are the stable place etc etc. That's the crucial point and that makes me think of another thing and that is we're talking about the geopolitics of all this. We are so focused on the genius act and mika the world is bigger and we live in a globalized economy and we are working on the internet you know it's a it's a global phenomena and I think that this may become and this is something seriously as a European I'm I'm concerned because I'm I'm thinking about the future I'm not thinking about myself I'm thinking about uh you know my children uh their grandchildren and I I sometimes think are we willing here in Europe to become secondass citizens in the world so to speak because I think the companies will move to the the pl place on earth which has the best regulatory system and it's interesting because one of the things about one of the one the critique critical points about um the Genius Act is saying okay you have this federal thing and then you have the states and blah blah blah and you know the states going to different rules if I was an American I wouldn't be that concerned about that you had the same with corporate law that's why you have all those companies incorporated in Delaware it's not because well never been to Delaware perhaps it's great but I but I think there are tax reasons or something for for that. So you can have competitions within competition within the US between the different states and I'm I'm sure that uh stable financiers will just move to the state that has the best framework and don't get me wrong when I say the best framework I'm not talking about where you can do hideous things.
I'm just saying where where you have the best regulatory framework in all all respects. I think that's a great analogy. If you look at um competition just in the US, you know, for a good jurisdiction just to do like legacy business, why does Delaware have all the companies? There's a bunch of reasons and you know, they outnumber everybody else. Uh because it's the best environment and that's a lesson that can be applied probably to many activities including, you know, where stable coins are going to end up.
Um, great. There's a few minutes uh left here. I've got uh one more question um which we've already touched on some of it which is just the regulatory fragmentation versus harmonization. So we've kind of touched on that a little bit. Let me just probe a little more.
So the Genius Act allows for dual federal state regulatory model potentially creating inconsistencies across the US i.e. the Delaware model while Mika enforces a single EUwide framework with extratorial reach. So that's kind of interesting. It's geo geocentric or geonormative boom but it has some type of extratorial reach.
Um what are the practical implications of these approaches for stable coin issuers operating globally especially regarding compliance costs and market access? Do you have any thoughts on that or we can go somewhere for the next two minutes? Yeah, I have thoughts on everything but not very constructed ones. Nice. You know, of course it's nice with Mika and and this is the whole idea between behind the European Union as such that you have a unified um system so to speak and you you can operate everywhere and that that's what how we in Monarium actually even though we're based in Iceland at the moment we we can passport our our license to to every country in Europe and we do the Um so the um of course you uh you know ha having a a a system like Mika is proposing.
The ma the main problem I see is this tendency and we had a discussion here yesterday from uh Charl from the European Central Bank. You know it's sort of like building the new system on the old system but I think we should rethink the whole system. And as I see it, you know, I'm not concerned. I'm not convinced that we're going away from fractional banking. I mean, it's just so effective as an economist.
It's just so effective in capitalizing value in the economy. We're not going to go away from that. And I think that we just have to keep in mind how money is created in the old system, you know. And I think that the stable coin um the stable coins are are just new technology and and I firmly believe we usually solve technical problems with technology. We find technical solutions to technical problems.
So that is why I'm so turning back to your question that's why I'm so a little bit concerned about Europe. Of course, I'm concerned about everything, but you know, putting this constraint on the issuers of keeping reserves in their competitors accounts simply doesn't work. And I think I think we should much more be talking about I mean how how can these different type of companies work together rather than setting them up as a as competitors. Well, we are competitors of course, but still and I think that as I said before, I think it's wrong and if we had more more time, we could discuss that. I'm sure that stable coins can actually increase financial stability rather than erode it.
Yeah. So, uh, definitely there could be, uh, so there's a little bit of, um, uh, the answers to yesterday's problems aren't the answers to today's technical problems. And, um, and yeah, so we're out of time. So, I mean, that was great. Um, does anybody have maybe have time for like one question?
Anybody have any questions they'd like to ask Gunnar? Okay, won't embarrass him. That just means it was amazing. Um, so hey, my name's Eric. I'm giving keynote later.
Come see me. I'll tell you why nobody wants your stable coin. And uh and and don't miss it at 3:00. And uh I'm a lawyer, but I'm not your lawyer. And uh let's just have a a round of applause for for Gunnar here.
Thanks a lot.
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