It’s been a terrific summer for digital assets in Europe, especially when compared to the lukewarm response they’ve received in the US.
With the listing of the Jacobi FT Wilshire Bitcoin ETF in Amsterdam in August, the continent welcomed the introduction of its first exchange traded fund (ETF) in Bitcoin spot markets. On the regulatory front, the European Union’s Markets in Crypto Assets (MiCA), a comprehensive framework developed around digital assets, provided legal certainty to the bloc’s digital asset enterprises.
Digital assets had a more difficult season in the United States. Despite some high-profile spot ETF applications from Wall Street heavyweights such as BlackRock and Fidelity, the Securities and Exchange Commission has been hesitant to approve any, causing a drag on Bitcoin markets. At the same time, it has maintained its crackdown on cryptocurrency exchanges, even as Congress fails to approve its own regulation measure.
Envious industry players in the United States see the trans-Atlantic discrepancy as indication that Europe is gaining ground. According to Lars Christensen, CEO of Seier Capital in Switzerland, Europe “hasn’t been good at eating America’s lunch for years”—but this summer’s moves demonstrate how clear regulations provide a significant economic edge.
Europe has clearly risen to the top of the list of digital asset-friendly jurisdictions. According to DealBook data, Europe surpassed the United States as a launchpad for digital asset startups in 2022, with 3,977 launched vs 3,357 in the United States. Even in fundraising, where the United States continues to dominate, European startups had a 14% growth in venture capital investment last year, compared to a 4% dip in the United States.
As the typical shelter for legacy tech and banking industries, the United States lagging behind Europe is a role reversal. For decades, the United States’ regulations were seen as the less onerous of the two, but Europe was perceived as more bureaucratic, with more severe requirements to follow.
Europe has beaten the United States to the front of the line in the battle for a Bitcoin spot ETF, demonstrating an inversion of responsibilities. Unlike in the United States, where the search for a Bitcoin spot ETF can take a decade, exchange traded products tied to Bitcoin have been available in Europe from at least 2015, with the release of Sweden-based XBT Bitcoin Tracker One.
Despite the SEC’s concerns about a spot ETF’s vulnerability to market manipulation, Christensen claims that the debate in Europe has been less heated.
The nature of the regulatory system in the United States also provides specific obstacles that are more visible than across the pond.
According to Lowell Ness, a lead partner on Fintech at the law firm Perkins Cole, U.S. securities rules are “intentionally vague,” in contrast to what he describes as a more “cut and dry” approach in Europe. This offers US regulators greater leeway in establishing rules, but it also opens the door to turf battles between agencies.
The lack of explicit regulatory rules—or even classifications of digital assets in the United States—has only worsened the problem. Businesses have responded by pressuring Congress to clean up the mess. In another situation, Coinbase, America’s largest exchange, directly petitioned the SEC for rules, but was met with silence and a lawsuit accusing it of breaking securities laws.
Because of this lack of certainty, some US corporations have considered relocating operations overseas. The US arm of digital currency exchange Bittrex is one example of this. The exchange announced its closure in April, citing the fact that operating in the United States was no longer “economically viable” due to the country’s haphazard regulatory regime.
Bittrex CEO Oliver Linch stated that the United States’ preoccupation on “navel-gazing debate” about jurisdiction has hampered it in comparison to the European Union. Rather than attempting to fit digital assets into existing frameworks, he applauded the MiCA for taking a “bespoke” approach to drafting regulations that give greater clarity for the bloc’s firms and regulators.
Aside from catching up with the rest of the globe, CEOs warn that any failure by the United States to get its act together will drag down crypto globally due to its status as the world’s financial powerhouse.
Because of the heft Wall Street would bring to the table, Dave Weisberger, CEO of the trading platform CoinRoutes, believes that Europe’s embrace of ETF-like products is “not as big of a mover” for drawing more financial companies into Bitcoin as the current crop of U.S. applicants.
According to the company’s 13F filing with the SEC, Jacobi manages around $894 million in assets. This is a far cry from BlackRock’s over $8.6 trillion AUM posted last year, or Fidelity’s $4.5 trillion.
However, Lowell from Perkins Cole warned that the same sense of incumbency could be holding the US back. The perception that the US market is unrivaled implies that the rest of the world will have no choice but to wait until regulators sort out their stances.
This, according to Lowell, is shortsighted because corporations are already migrating offshore rather than waiting for the United States to catch up.
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.