On Thursday, the top financial services official of the European Union said that the crypto rules they have developed would be pointless if the rest of the world does not introduce regulation.
Speaking at the World Economic Forum in Davos, Mairead McGuinness, the European Commissioner, said that those calling for a global framework had gotten extra ammunition, thanks to the recent turmoil in the crypto market.
However, she also warned that people need to be the focus of any future innovations in crypto.
The bloc has developed the Markets in Crypto Regulation (MiCA) rules for the crypto space, which makes EU the world’s first major jurisdiction to have developed regulations for the industry.t
The EU official said that while this was a great thing, it would have no meaning if the rest of the world did not do the same because this development is global and there cannot be any barriers to it.
She said that the technology does not come with borders due to which a global approach is needed, or they would continue to see more and more problems emerge down the line.
The Financial Stability Board (FSB), the international group specializing in recommendations for the global financial system, has already laid down the groundwork for a crypto regulatory framework.
The chairman of the FSB, Klaas Knot, said in Davos that they want controversial proposals to be complete before summer.
However, McGuinness was very straightforward about the challenges that would be associated with the implementation of the rules internationally.
She said that they do want to see crypto regulated globally, but the same applies to climate change and someone has to get things started.
McGuinness said that the major concern was that crypto exchanges and other companies could try to provide their services to customers in the EU from regulatory havens that would undermine MiCA.
The same issue had been highlighted by Klaas Knot as well.
Nonetheless, there is some hope of a global approach in light of the disasters that have plagued the crypto industry in the previous year.
There have been a number of collapses, including Terraform Labs, Celsius Network, Voyager Digital, and the FTX crypto exchange.
McGuinness said that these disasters were an example of just how things can go wrong and the world is now realizing it, which means it is time to begin talking about it.
While the co-founder and former CEO of FTX, Sam Bankman-Fried is now awaiting trial, McGuinness said that they need to develop regulations for cases that are less egregious.
She said that some people had jumped onto the crypto bandwagon because they were excited about the technology, while others were distrustful of the establishment.
But, she said that it had gotten out of control and this had resulted in casualties. She said that while mistakes happen, the problem with crypto is that there are a lot of people impacted.
Even when MiCA goes into effect from 2025 onwards, there will still be work required because crypto continues to evolve.