I was invited by Zühlke Group together with Hanseatic Blockchain Institute e.V., Riddle&Code and Frankfurt School Blockchain Center to delve into the intricacies of crypto regulation from a socio-political perspective. Main points:
Regulatory Impact on Crypto Services:
Mandates crypto-related services to be exclusively undertaken by authorized and regulated providers.
Integrates crypto services into the highly ringfenced financial services industry.
Challenges for Real Industry Players:
Hinders the launch of crypto economic models without the backing of a regulated entity.
Transfer of Funds Regulation complicates transactions with unhosted wallets or unregulated entities.
KYC Requirements and Real-World Use Cases:
Regulated providers prefer hosted wallets with full KYC, impacting real-world use cases.
Makes micropayments unaffordable and restricts user adoption.
Origins of Overboarding Regulation:
Reaction to Facebook's Libra project led to overboarding regulation.
Resulted in basically a ban on peer-to-peer use cases, shifting industries into the tightly regulated financial services sector.
Impact on European SMEs:
Disproportionately affects European SMEs (which are overwhelmed by this heavy regulation), hindering the development of sustainable business models.
Opposite of promoting the growth of European SMEs.
AML Regulation and Privacy Concerns:
AML Regulation mandates extensive sharing of personal data between service providers.
Systemic lack of enforcement: Capacities for handling AML suspicious activity reports remain inadequate.
Raises questions about the necessity and proportionality of increasing privacy rights infringement.
Democratic Separation of Powers:
German legislative bodies often blindly follow administrative legal bills, specifically in complicated matters.
Systemic sidelining the judiciary due to dependency of financial service’s management on personal reliability test by BaFin.
Results in administrative power writing its own rules, not being challenged by courts.
Looking Ahead:
Calls for thoughtful engagement and scrutiny as preparations for MiCAR and related laws unfold.
Encourages stakeholders to consider legal avenues to shape the future of crypto regulation.
Courts may be the last resort to achieve a balanced and reasonable regulatory framework.
Jennifer Balder thoughtfully curated this Blockchain Circle event. I learnt a lot from the contributors Benjamin Bönisch from ETO GRUPPE, Anne-Sophie Gógl from Digital Euro Association, Manuel Klein from Deutsche Bank, Alina D. from J.P. Morgan, Daniel Nagy from Giesecke+Devrient, Juha Viitala from Membrane Finance and Bernhard Schweizer from SAP.o Regulation – a socio-political perspective