Crypto / Web3 in Europe; what happened, what's next?

Transcript

foreign thanks for being here and this is our presentation on what's happening in Europe for crypto and work 3 and the likes etc etc um welcome uh a quick word of introduction uh UCI we are a crypto organization that does basically lobbying walk and think tanks uh at the EU level so the idea is to bring Awareness on all the Innovative use cases of crypto to the EU institutions

um let's start without further Ado uh the the idea of this talk is to bring you a broad overview of what's been happening in the crypto space for the crypto space uh concerning the crystal space at the U level and then what's what's coming next um so let's start with Mika you probably heard about Mika it's the big big regulation that the uh the three logs of the EU institutions recently finalized and basically it regulates all the centralized entities that are dealing with crypto that's the objective and though exchanges custodians uh issuers of crypto assets and saber coins so

that's basically the scope everything is quite heavily regulated and there's licenses required there's uh white paper obligation if you want to issue a new crypto asset so it's quite a burden some regulation for all the centralized entities what's outside of the scope of this regulation is uh theoretically defy so the decentralized use cases nfts daos and bridges bridge and robbed assets but very important thing to have in mind is that we first we don't have the final version of the text so we have the broad Direction where the text is going and

the political compromises as we name them so we know basically where the text is going but we don't have the final text and sometimes you know the devil is in the details and basically all those exemptions they are drafted in a way such as you have to determine really if for example for D5 whole distance decentralized are you right and depending on the draft the final drafting of the exemption there's things to look at so I would advise any project that deals with this which is basically all projects um to have a look at the final text and maybe contact us or or we can we can discuss around the final version that that should come out officially at the

beginning of next year and unofficially in probably a month or so um the whole text will be applicable in 18 to 24 months so it's still there's still time to anticipate and to look at what's happening uh but it's it's long and it's quite short at the same time so this is for basically the broad regulation of crypto assets and at the same time there's another one uh very funny one that you've probably heard about too um it's the anti-money laundering regulation so basically there's a few amendments that that made a lot of noise in the crypto asset Community uh regarding this

travel rule for crypto asset which mandates every centralized uh entity to collect and to transmit information about the customers about the trend the the transaction to other entities which is of course a huge uh burden regulatory burden but also a huge privacy risk for uh for European citizens so that's something we are not very happy about uh in addition there's no minimum thresholds for data collection um there's some data protection issues then of course we just I just said it and necessary client verification for unhosted wallets which is uh practically very complicated and we don't really

know how it will be implemented so not so good regulation um we have a bit a bit of comments on that and uh likewise it will be applicable in 18 to 24 months from there so there's still a bit of time and we are also still waiting for the final version so still uh ongoing uh on the final draft so all in all um what's been happening is this bad um I think there's we think there's positive and negative uh positive this is the like eui recognition of uh crypto assets of what of the importance of the crypto assets and the crypto activities of defy of all the the things

that basically we are building so this is a good thing in a way because this means that institutions uh private companies big companies will look at crypto in a more like normalized way it won't be like a fringe thing but more like a normal thing um which has good eyes and bad sides of course um as you know and crypto assets service providers can be licensed all across the EU with a unified regime so there's you know only need to regulate in one place and you are regulated in the whole of Europe so it's a simplification from what's been happening before where you had to regulate in every single uh country one by one basically the minus side basically is very simple

um there's a legal uncertainty for all projects experimenting with decentralized the governance or decentralized protocols in general um we've seen that we don't have the final voting for The D5 exemption um it's even if we had had the final voting it's not it would it will probably not be very precise as to Define what is decentralized and whatnot so this is still something uh that we will have to work with and there's an extremely stringent regulation on stablecoins uh that's the very the worst probably that we could have uh ignoring the different designs and functionality uh of of not to be the

decentralized uh stable coins which uh is not basically the regulation was built to fight against uh Libra so it's really it's been really been the focus from the beginning and they went all through the end um so good side is that the stable coins will be really included inside of the regulation the bad side is that there's not a lot of actors that will be big enough and have a sufficient size to to to deal with the whole complexity of this regulation that's it for what's been happening uh passing the mic to Marina so what's coming next um we know that Mika has been

um in in a way in Brussels discussed in Brussels for the last two years and we have another two years until it will be applicable so what is happening um you are you probably heard about um you know what what I mean what Simon said was on the documentary level but what will happen in in practice what will happen when you will want to have a license as a project the important thing is that the national Covenant authorities they're going to have a lot of say into are you getting a license or not and also um in a way the factor they're going to Define what is in the scope of Mika and what's not in the scope of Mika which

means that is especially important for decentralized projects and for nfts nfts has have been defined in Mika and the definition says that they should be unique and non-fungible what is also very important is that they should be not um I mean not fractionable and I think this is I mean we all understand what this means we'll see how the national Covenant authorities are going to basically interpret this in the next years what is also very important is what's coming next are we having a Mika tree you probably heard about Lagarde and

European Central Bank uh issuing opinions on Mika issuing opinions or crypto assets and stable coins um but I think what is really really important is that we understand that the European Central Bank is not a legislator which means that they cannot start the procedure for let's say a new Mika 2 that might regulate D5 so what is it what is important is to look into the commission and what the commission plan is and what the commission is going to do as you know all the institutions they have a mandate so Brussels also works in Cycles the commission's Mandate is going to end quite soon in a year on in a year

and a half and So within this mandate we do not expect new regulations that are linked to crypto but we can expect new ones with a new mandate so what can we do in between we definitely want to be more proactive than just reactive and I'll explain a little bit about this later but just to give you an overview to what's coming there's not going to be yet Mika 2 but what is happening in Brussels at the moment is we're going to have a new data protection regulation a new tax reporting regulation there's going to be consultations around defy even a potential sandbox around D5 but what is important is that there has been

an increased activity from International organizations like iosco fadev OCD also the bank of international settlement has issued a lot of opinions on D5 and the magic word in the next years is definitely D5 so everyone wants to issue opinions write standards and that's definitely going to influence also the potential regulation regulation on D5 that is coming from Brussels what we can do or what we want to do what we are saying our narrative is it's not a duck which means that decentralized use cases are not similar to centralized use cases and what we want to do is speak their own language

so wherever you are at the regulatory panel they usually say oh you know if it quacks like a duck if it walks like a duck then it's a duck so we should regulate defy in the same way as we're regulating Financial financial institutions and financial in-way service providers but what we are saying it's not the same we have seen this with Celsius we have seen this with a lot of different centralized organizations versus how in a way smart contracts operate and how D5 operates so we are launching this campaign and we're going to be tweeting about it's not a duck and basically speaking about this and and forcing in a way this narrative in in a discussion

foreign yeah so to close this off um it's good that you all came um and the rumors uh relatively full it shows that more and more people care about what's happening in Brussels now decentralization is something that brings us all together here I believe and we all know it's real um we took over the job of speaking on behalf of all of us in Brussels explaining the benefits of decentralization for all the individuals but also the future of Europe as a global economy however I think there's also a duty of us as a space because if we look at Dow participation numbers and governance today if we look

at how certain Protocols are run we know that we can do better in terms of how we actually practice decentralization right all of us individually know uh where things are maybe not as great as they could be and if we don't get there on our own we have to expect very string and regulation from Brussels that basically says decentralization is a mirage it's just an excuse to evade traditional regulation and so on and so forth so we really need to step up we also need to show non-financial use cases of crypto we really need to push digital identity for example and things like that to show that not everything needs to be regulated as a financial instrument right all of this stuff is

yet ought to be proven so what we can do and all of us can do is get better at communication reach out for dialogue with Regulators they are not monsters they're actually humans with an information asymmetry problem let's do more research let's fund research groups all over the world let's make actually practical proposals for what could a Sandbox for D5 actually look like what could a potential you know anti-money laundering uh regulation that is privacy preserving but yet effective or much more effective than what we have today look like that uses D5 principles and so on so there's a lot of things I

think to innovate on together both with Regulators lawyers and developers so I also hope that we may see some hackathons this or next year around hacking you know privacy preserving compliance solutions for defy and so on let's make this a movement um yeah um I didn't make that slide but okay um maybe I would say let's save it all together lawyers are a part of the conversation at this point but uh I think it needs all of our brains um yeah we are optimistic I would say marina maybe some Marina is the executive director of the UCI so maybe you want to you know spread the optimism a little bit thank you I think just for

for the end of this presentation I need to say that we have really seen that this movement is a community we've seen so many people supporting us uh also um I don't know volunteering for this movement or working with us trying to share ideas on how we can improve we are going to do this in the future we're going to scale and work more on those ideas do more research as it was discussed and just thanking everyone for being involved and for supporting us thank you thank you is there any questions

hi thank you uh do you have any idea about what's going on in the UK where this um it's also in Europe I think um so yes but also not in too much detail I think since this has been recorded we should be very careful what kind of opinion we now say so um no we're not really focused on the UK but we do believe that the UK due to its special position now relative to the EU will try to potentially compete in a positive and constructive way such that you know there is a dialogue maybe and EU can learn maybe from the UK and vice

versa that would be my optimistic plan but um yeah I don't know I know that there are a lot of crypto companies who have a headquarter in the UK so they all believe I think there's a strong Lobby but yeah that's very general I cannot say much more just maybe adding that the the general message messaging from the UK has been very very positive recently but we haven't seen uh any practical and concrete proposal around this messaging yet so thank you very much you see guys for your presentation and for all the work

the very important work that you are doing for the community you mentioned uh stablecoin regulations very stringent stable congregulations what do you think would be your opinion the implications for a project like maker Dao that is at the centralized issue could have a very hard time complying with these regulations what could be the implications uh for a project like maker so um we we've been raising the the alarm regarding decentralized stable coins from the beginning because the scope of the regulation was so broad that it encompassed all the stable coins um

we understand now that it was actually an objective so as of today except for the D5 exemption where we still have to see the exact wording um there's a very very high risk that dye is captured and then regulated as a centralized entity which of course doesn't make sense and has the effect that the the the stable coin would be illegal inside of EU because it would not be able to uh it could not respect the obligations basically uh the consequences of that the Practical consequences of that

um you can as an individual use D5 products and you're not inside of the scope of the regulation so if you have your own wallet and you use uh I don't know a CDP to create die that's probably fine but not sure about that what you have to to see at the the final version but what's for sure is that all the centralized entities in Europe will be prohibited from touching die which uh of course may be an issue for the eye um this is still up to discussion and we have also to see where what will be the practical [Music] approach of this uh notably defy exemption by the EU Regulators

um but yeah we are not extremely positive on that because one of the big objectives of the regulation was to crack down on stable coins yeah yeah maybe just to add um like the the cusps are the Crypt as the service providers are regulated so exchanges are extremely regulated whatever they're going to list on the centralized exchanges it needs to be verified and even like there was a discussion around um Bitcoin as not having an issuer there uh centralized exchanges will probably need to write a white paper explaining why they are listing Bitcoin on the exchange um I mean this is still not sure because

we don't have the last draft of of the of the text yet but that is the logic like the in a way centralized exchanges are the door to to crypto hey thanks guys for the presentation um I just wanted to ask what do you think is the best way for non-lawyers uh to well help you guys or help push for um more you know proper regulation thank you so I think the most important thing is to um together and uh do more research this is going to be our Focus especially for the next six months we're going to write uh two reports on defy and stable coins

and issue them around December so whoever is interested in writing researching uh sharing information it's very welcome and of course we also need financial support so whoever wants to donate different projects that want to help us just Reach Out and I just want to take the occasion to thank all the people that have helped us on the last kitcon ground uh it's been amazing and uh we yeah thank you very much everyone um also if you are a project like a company or audio or anything and you want to be more involved you can reach out to us and we have like a membership

structure uh for for actual projects so do not hesitate to contact us hi um two two questions um first thanks for educating the politician about the difference between defy and C5 but how do you draw the line uh between like how much decentralized it is for like maker Dao is a good example and the second question is if you define something as decentralized let's still use the make your data example but it uses some centralized uh collateral like usdc that can be confiscated what impact it will have do you think on those decentralized

protocols thanks thank you this is the core question we don't have a definition of decentralization in Mika in general they say that decentralized organizations defy are excluded from the scope but we don't know what is decentralization so when we speak to them in a way many times they say oh it's a very nice theoretical concept but in practice we don't think that there is a lot of decentralized projects out there and last time we had a discussion they said but you know like I wouldn't want um to look at Terra as a decentralized project so you know it would not be in the scope so we would not regulate so you know all these things that happened the consequences would not be linked to

a liability but then we said you know we're not talking about Tara we're talking about I don't know other dials CNS Dao and Elder doubs that are more decentralized so there needs to be more education and we're going to see how this will evolve especially with the involvement of the National Conference authorities and Asthma some other agencies that are involved in the process and what you asked about this in a way Defy is is a Lego uh yeah composed by the different applications and that is going to be extremely I would say interesting and challenging um even I mean if we think about the centralized world and finance there needs to be in a way contracts between

companies and service providers you mostly I mean evaluate if what they do is is legal and compliant and if they have a license so that will probably be the case with centralized entities so the decentralized ones will will live in in a different world and they're like legal implications their business implications their liquidity implications to this and it will have like I would say a really important spillover effect we talked about this now with uh you know the recent developments in the last weeks but Mika is the first regulation in the world and also in Europe for like an overarching regulation for crypto so that is

definitely going to have an effect in in how we build the system foreign is going to do with real world collateralization reward assets so how do you bridge that Gap and you make it the link strong enough so that it holds so we think that's a really positive signal that an Institutional player like Society general or others are trying out this way of uh yeah securitization lending I think this can actually demonstrate to

Regulators that there is a real utility um so we we think this is great um there are also developments by some protocols like other who try out some kind of pro version of the protocol that is just for institutional players playing with concepts of kyc identities on chain so this is in general also a direction we need to I think research much more um so overall I think those are positive movements um there is you know talk about maybe so there was a pilot regime already around the Mika regulation for institutional players using uh blockchains as a settlement layer

and now there are talks about a potential pilot regime in the defy space right so there could be some equivalent regulation allowing institutionals using those decentralized protocols if there are some guarantees I suppose around the identities that can do stuff there so this is what I meant with let's research uh some privacy preserving technology that can you know bring those worlds together in a meaningful way um I think that would actually help us out of this impasse that we're in right now where Regulators think we cannot comply we think they don't get us you know let's just build something that convinces everybody foreign

thank you very much [Applause]