- The EU runs the risk of disadvantageing its crypto industry over the United States and Asia by unadjusted laws, since legislation works far too slowly.
- The global requirements have innovation and agility towards rigid framework conditions and question traditional ways of thinking.
The European Union continues to be faced with growing concerns about its position on the global cryptoma market, since the United States and Asia quickly adapt their regulatory requirements. Financial manager Franklin Templeton has warned that the EU runs the risk of becoming a “Fly Over Zone” for crypto companies and investors if it does not keep up.
Despite the early pioneering role, which the EU takes up with its framework markets in Crypto Assets (Mica) in 2023, delays in legislation and inflexible regulation could lead to Europe losing regions with more flexible and adaptable strategies.
With the introduction of Mica, however, the EU wanted to establish itself as a global pioneer by creating a uniform legal framework for crypto-assets in its 27 member states. This comprehensive legislation should ensure regulatory clarity and investor protection in a rapidly growing sector. Catriona Kellas, International Lead for Digital Projects at Franklin Templeton, emphasized that the initial momentum may be waned.
In your speech on the Digiassets 2025 conference Find Kellas that the EU is still in a strong position, but the risk of becoming a “Fly Over Zone” is growing because the regulatory processes slow down. The EU’s legislative apparatus is comparatively sluggish and less flexible than developments in the United States and in the Asian-Pacific area.
Kellas referred to the latest signs that the European Commission increasingly becomes aware of the need to strengthen the EU’s competitive advantage in the crypto sector. For the first time, the Commission referred to the competition in the discussions about regulation, a sign of a shift in priorities. The speculation about a possible update of Mica, which is informally referred to as Mica 2, is increasing. This could change or expand the existing frame to better adapt it to global trends.
In addition, the EU pilot project on the distributed ledger Technology (DLT), which is intended to offer crypto companies, is currently being checked. The aim of the pilot project is to give the regulatory authorities the opportunity to carefully observe developments in the industry and at the same time give the company space for innovations. However, the regulation is still new and must be refined to ensure that it remains relevant in the event of changing market conditions.
Different regulatory environments and market effects
While Europe is thinking about regulatory updates, the crypto sector in the United States benefits from its more revealing environment. Kellas described the “energy”, which is based on the United States, as a positive influence that could enliven the European markets. At the same time, Asian legal systems continue to attract crypto transactions because they offer more adaptable regulatory framework conditions that promote innovation and investments.
This divergence has real market effects. Leading crypto exchanges based in the United States, including Coinbase and Gemini, are actively striving for licenses in strategic EU countries such as Luxembourg and Malta. The preservation of such licenses would give you access to the entire EU market as part of the passporting system. However, some EU regulators are concerned about the pace of license and passporting permits, especially with regard to the challenges of monitoring crypto-asset service providers (CASPS).
New regulation and problems of their enforcement
Kellas also pointed out global change in regulatory attitude towards digital assets. With the increasing anchoring of cryptocurrencies in the financial systems, many regulatory authorities and legislators turn away from a risk acative policy. Nevertheless, “soft regulatory methods”, informal guidelines, scope for discretion of the supervisory authorities and non -binding recommendations represent a special challenge for the enforcement and compliance with the regulations.
She pointed out that governments and regulatory authorities are increasingly under the pressure of political leadership to rethink traditional regulatory framework. Innovation and agility are in demand instead of long -old, rigid approaches.
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