EU Data Act risks pushing crypto innovation overseas


Related articles

The crypto exchange-traded products (ETPs) service provider 21Shares released the eleventh version of its “State of Crypto” report on Jan. 28, which described the impact of forthcoming regulatory changes and their impact on local crypto scenes, among other insights. 

According to the report, it is clear that crypto is “alive and thriving,” however, there is an increasing “jurisdictional competition” in a global race to secure talent in the industry and create hubs.

This can be seen through various regulatory actions set into motion in the last year and intended to materialize in 2024. The United States and the European Union were mentioned as two places that could potentially be “risking their lead” in the industry.

“…things aren’t looking so clear for the European Union. While Markets in Crypto Assets Regulation (MiCA) may help centralized service providers engage in business operations more efficiently, the Data Act’s clause to shut off smart contracts may drive away blockchain developers.

On Dec. 22, 2023, the EU published its Data Act, a piece of legislation that aims to “facilitate and promote” the exchange and use of data within the European Economic Area. However, the law has a clause to cut off intelligent contracts.

The “kill switch” for smart contracts aspect of the law has since sparked uncertainty and an uproar within the crypto community.

The lack of clarity surrounding crypto assets in the U.S. is also a point the report highlighted as not being able to maintain an environment for projects to innovate.

“The main question going into 2024 is if regulators in the largest market in the world, the U.S., will finally provide the regulatory clarity entrepreneurs and consumers desperately need.”

Nonetheless, it also said the passing of the “Clarity for Payment Stablecoins Act” by U.S. regulators may help provide a sense of regulatory clarity for stablecoin issuers like Circle (USDC) and would benefit consumers. 

Related: Nigeria and UK foundation launch Code Clubs for digital literacy

The report also highlights that some places are more well-positioned to foster industry innovation such as Hong Kong and the United Kingdom.

The U.K.’s positive feedback on the future of its financial services regulatory scheme for crypto assets was mentioned, with 79% of respondents being “mostly supportive” and 40% being crypto-native companies.

“Indeed, the U.K. may be able to meaningfully attract crypto businesses in 2024. We already saw a preview of this trend with a16z crypto expanding to London and planning to host a Crypto Startup School there in 2024.”

The U.K.’s Economic Secretary to the Treasury also emphasized that “the government’s ambition to make the U.K. a global hub for crypto asset technologies remains.”

21Shares also pointed out that Hong Kong has taken a “U-turn” on crypto regulation. In August 2023, the region issued the first licenses under a new system regulating crypto exchanges.

In December 2023, Hong Kong released criteria that it will oblige stablecoin issuers to meet in order to obtain a license to offer assets. Around the same time, it also created a pathway to prepare to receive applications for spot crypto ETFs.

“It remains to be seen whether Hong Kong can attract more leading crypto players and fulfill its goal of becoming a crypto hub once again.”

Cointelegraph contacted 21Shares for additional information on the latest “State of Crypto” report.

Magazine: Asia Express: HashKey now a unicorn, Tether hits back at UN, no Singapore Bitcoin ETF