Conversation with Eve Kylie, vice president of the European parliament, on the regulation of the Mica
Vice President of the European Parliament shares his opinion on the legislation of the European Union on the markets of crypto assets and how it will affect the industry.
In the article I wrote for Cointelegraph, I talked about how the European Union moved forward in regulating the crypto-acting market through Markets in Crypto-Sssets (Mica) and Transfer of Funds Regulation (TOFR). Based on this topic, I had the honor to interview one of those who know the most about the regulation of new technologies: Eva Kylie, vice president of the European parliament. It works a lot to promote innovation as a driving force to create a European digital single market. Check out the interview below, which considers the key points regarding the Mica, some proposed legislative provisions are more controversial than others, for example, decentralized finances (Defi) remain outside the scope of action, controlled by self-filled smart contracts (Lex Cryptographia), Decentralized autonomous organizations (DAO) and much more. 1 - Your work to promote innovation as a driving force to create a European digital single market was very intense. You were a speaker for several bills in the field of blockchain technology, online platforms, big data, fintech, artificial intelligence and cybersecurity. What are the main problems that legislators face when introducing bills regarding new technologies? Technologies develop rapidly, and innovative solutions require a certain space for testing and development. Then politicians need time to understand how these technologies were formed, consult with interested parties and evaluate the expected influence on traditional markets. Thus, the optimal way forward is not to immediately respond to any technological development of the legislative initiative, but to give time the technology to develop, and politicians - to get an education, understand the advantages and problems of innovative technologies, understand how they should affect on the current architecture of the market, and then offer a balanced, technically neutral and promising legislative framework. To this end, in Europe we adhere to the approach “We will wait and see” that allows us to act safely, answering three fundamental questions: (1) How early should be regulated technological development? (2) How detailed should the proposed regulation be? And (3) how wide should the scope of its application be? In this context, new problems may arise, among which it is necessary to solve whether old rules for new tools or create new rules for new tools. The first option is not always viable and may have undesirable consequences for legal certainty, since amendments or amendments can affect the complex legislative framework. On the other hand, the second requires time, consultations with interested parties, interagency control and other things. In any case, it should be given properly that the answers to these questions determine the growth of the market, the time for achieving this growth and the influence of this regulation on other markets, since there is also a geopolitical aspect that must be taken into account when regulating new technologies. 2 - in 2020, the European Commission launched a “digital financial package”, the main purpose of which is to promote competitiveness and innovation of the financial sector in the European Union (EU), European approval as a global legislator of standards, as well as ensuring the protection of digital finance consumers and modern payments. What should the regulatory framework be taken into account to be a competitive advantage in this or that jurisdiction? As I said, today it is more important than ever to consider the global geopolitical dimension and the influence of the promising regime of regulation regarding new technologies. You see, in the new global digital economy, the concentration of technological potential enhances competition between jurisdictions. For example, the technological interdependence and the dependence between the dominant market players and the geographical regions that they control are obvious in Asia, Europe and America. In this context, digital products and services are transformed into power, have strong geo -economic consequences and contribute to "digital imperialism" or "technology". Thus, any promising regulatory framework should be considered as a source of national or jurisdictional competitive advantages, creating reliable, favorable for innovation protected from market risks. It can attract human capital to maintain innovation and financial capital to finance innovation for a long time.
These principles have become the main driving forces to create the DLT pilot regime and the provisions on the markets of crypto assets, since we managed to reach two milestones: to create the first pan -European “sandbox” in history for testing DLT in traditional financial infrastructuresThe Vogo market and the first specific set of rules for cryptocurrencies covering cryptoactives, including stablecoins, issuers, market manipulation and much more, establishing standards for how the approach to the regulation of the cryptorrhoids should look, and creating a competitive advantage for a single European market. 3 - the initial reputation of the blockchain as a technology “allowing” to “cheat”, to make illegal payments from drug dealers and terrorists in the “dark web”, as well as “ecologically irresponsible”, created many obstacles to any normative attitude to this technology. In 2018, when you participated in the discussion to regulate Blockchain Week in New York, only small jurisdictions, such as Malta and Cyprus, experimented with technology and had legislative proposals for regulating the industry. At that time, ignorance of the technology led to the fact that many regulators now and then stated that blockchain is just a trend. What helped you understand that the blockchain is something more than just a technology that allows you to create crypto acts and tokens for crowdfunding? At the very beginning, I realized that blockchain is an infrastructure for a wide range of applications that will change market structures, business and operating models, as well as have a strong macroeconomic impact. Today, although the technology is still developing, it is already perceived as the basis and infrastructure of any environment of IoT [Internet of things] using the interaction of a person with a machine and a machine with a machine. It is expected that its influence on the real economy will be decisive, although it is not easy to predict how and under what conditions. Nevertheless, the rapid development of the blockchain has already forced both business and state leaders to think about (1) how new market platforms will look in the coming years, (2) what will be the right organizational structure in the new economy, and (3) what markets will Structures must be formed in order not only to survive in economic competition and remain technologically relevant, but also to generate and maintain inclusive growth, proportional to the expectations of society. The projects of the European infrastructure of blockchain services and the European Observatory and the Blockchain forum, which are designed to provide the EU, are of the most important importance in the new digital economy through the promoting technological progress and testing of blockchain convergence with other exponential technologies are. On June 4 - 30, the European Union reached a preliminary agreement on how to regulate the crypto industry in the bloc, giving the green light of the Mica, its main legislative proposal for regulating the crypto assets market. First presented in 2020, the Mica went through several iterations, and some proposed legislative provisions turned out to be more controversial than others, for example, decentralized finances (Defi) remained outside the scope. Defi platforms such as decentralized exchanges, by their nature contradict the fundamental principles of regulation. Is Defi regulation at the current stage of its development possible? Indeed, the preliminary criticism received from the market participants, when the provision on crypto acting markets was presented in September 2020, was that it excludes decentralized finances that are aimed at decentralizing financial services, making them independent from centralized financial institutions. However, since Defi, ideally, works with smart contracts in decentralized autonomous organizational architects using decentralized applications (Dapps) without the need to identify the subject, it cannot be properly included in the provision of crypto-activists markets, which is directly applied to financial services suppliers Based on the blockchain, which are or should be legally created subjects controlled by specific requirements for risk management, protection of investors and the integrity of the market and, thus, bearing liability in case of failure within a clear and transparent legal context. Defi, by plan, does not have the characteristics of the "organization", at least in the usual understanding for us. Therefore, in this decentralized environment, we need to rethink our approach to what will be a “subject” that will be liable in case of unlawful actions. Is it possible to replace it with a network of pseudonymous entities? Why not? However, pseudonym is incompatible with our legal and normative tradition. At least so far. Regardless of architecture, design, process and characteristics of a product or service, everything should always end with a responsible person (or persons). I would say that the case of Defi reflects precisely the problem of the absence of the one who can be blamed for. Thus, decentralization seems to be a much more complex taskWhose for politicians. 5 - the movement of the European Union to regulate the cryptocurrency and blockchain industry began long before the Mica. On October 3, 2018, the European parliament with an unprecedented majority of votes and, with the support of all European parties, voted for a "blockchain resolution." How important is this resolution in terms of political economy? How did the adoption of a blockchain resolution contribute to the fact that the European Union took the initiative to regulate? The resolution of the European Parliament on the Blockchain from 2018 reflected the views on how to approach from the point of view of regulation of technology, which has still developed (and continues to develop). The main argument for the resolution was that blockchain is not just a technology that allows the use of cryptocurrencies and crowdfunding tokens, but an infrastructure for a wide range of applications necessary for Europe to maintain competitiveness in the new economy. Based on this, the European Parliament Industry (ITRE) Committee authorized the development of the resolution: "Technologies of distributed registers and blockchain: construction of confidence using disintermeding." And this was my part of political entrepreneurship, which I felt that I must take on to unlock the demand for regulation and encourage the EU institutions to think about the prospects for regulating the use of blockchain technology. Therefore, when drawing up a resolution, I sought to create not just the basis of legal certainty, but rather the institutional certainty that would allow blockchain to prosper the Unified EU market, facilitate the creation of blockchain markets, make Europe the best place in the world for blockchain business and make the EU legislation a model for imitation For other jurisdictions. Indeed, the blockchain resolution prompted the European Commission to develop a draft DLT pilot regime and proposals for crypto-acting markets, reflecting the principles of technological neutrality and the concept of the neutrality of a business model necessary to promote the implementation of digital technology that is of the most important strategic importance. 6 - There are various blockchain architects, especially those based on blockchains without access right, which provide not only disinermedia, but also decentralized control structures with automation properties. Do you think that as these structures develop in the future, there will be a place for “Lex Cryptographia” - rules controlled using self -filled smart contracts and decentralized autonomous organizations (Tao)? And if so, what principles or recommendations should be taken into account in this case? The ongoing technological progress and the prospect of a decentralized global economy working in real time using quantum technologies, artificial intelligence and machine learning along with blockchain technology will soon lead to the development of Lex Cryptographia, since the systems based on codes will seem the most suitable way effective application of the law in this new environment. However, this will not be an easy task for politicians, developers of politics and society as a whole. In the process of navigation in the space "Lex Cryptographia" it will be necessary to answer critical questions at the code level: what will such a system be programmed? What types of information will it receive and check and how? How often? How will those who serve the network be rewarded for their efforts? Who will guarantee that the system will work as planned when the regulation is laid in the architecture of such a system? The prospect of "Lex Cryptographia" requires us to expand our understanding of what will actually be "good regulation" in this case. And this is a task for every jurisdiction in the world. I would say that the path forward is to use the “sandbox” once again - as we did with the DLT pilot mode - and create a strong but flexible space that will allow both innovators and regulators to exchange knowledge and receive the necessary understanding , which forms the basis of the future legal framework.
Tatyana Storyedo is one of the founders of the Oxford Blockchain Foundation and the blockchain strategist at the Said School of Business of Oxford University. In addition, she is an expert on Blockchain business applications at the Massachusetts Technological Institute and the chief strategist of The Global Strategy. Tatyana was invited by the European parliament to the intercontinental conference on the blockchain and invited by the Parliament of Brazil to public hearings on the bill 2303/2015. She is the author of two books: Blockchain: Tudo O Que Você Precisa Saber and Cryptocurrencies in the International Scenario: What is the position of central banks, governments and authorities regarding cryptocurrencies?