Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Simon Polrot: Adan – Unraveling MiCA and the New Regulations Threatening Crypto in Europe

Episode Date: October 20, 2020

Adan (Association for the Development of Digital Assets), is an organization which helps promote the development of the crypto industry in France, and more broadly in Europe. Its President, Simon Polrot, is also the Co-founder Ethereum France, which host the EthCC conference in Paris.The European Commission has released a regulatory proposal, MiCA (Markets in Crypto-Assets), which falls under The Digital Finance Package. The Adan team have been working hard to understand, dissect and establish positions with regards to this regulation. The scope of this MiCA is vast, and it covers nearly every type of activity which relates to cryptocurrencies, utility tokens, stablecoins, and security tokens in Europe. In addition to being broad, it puts enormous restrictions on the DeFi ecosystem by merely ignoring most decentralized use cases, making it nearly impossible for DeFi to continue existing as we know it. It's an important piece of regulation which would apply to almost every crypto asset company or issuer across the European continent, as well as companies who have customers or do business here.We chat to Simon who explains what the draft proposal means and the effects it will have on the European crypto industry. He also shares how the community can get involved in steering the regulation in favour of the industry before it's passed into law.Topics covered in this episode:Simon's background and how he became involved in cryptoAdan's mission in France en EuropeThe high level principles of crypto regulations in Europe and the frameworks already in placeThe EU Commission's Digital Finance Package explainedWhat MiCA is and who falls under this regulationHow the Commission identifies “token issuers”How MiCA affects DeFi stablecoins like DAIWhat are Crypto-Asset Service Providers (CASPs) and how they are concerned by MiCAHow the regulations may impact mining and stakingHow MiCA favors financial institutions over startups in the crypto spaceWhy Simon thinks there is a positive side to this regulatory proposalWhat Adan is doing to raise awareness and lobby to amend this proposal and repair the issues arising out of the draft proposalHow crypto companies can take part in the work of getting this regulation amended before it passes into lawThe possibility for an alternative crypto finance ecosystem to emerge from this regulationEpisode links:Adan WebsiteAbout AdanAdan Webinar: Understanding the MiCA and Pilot Regime crypto regulationBecome a member of AdanAdan on TwitterSimon on TwitterSponsors:Algorand: Learn how to start building on Algorand – Free webinar on November 17th - https://algorand.com/epicenterThis episode is hosted by Sebastien Couture. Show notes and listening options: epicenter.tv/362

This is Epicenter, episode 362 with guest, Simon Polaro. Hi, I'm Sebastian Couture, and you're listening to Epicenter, the podcast where we interview crypto founders, builders, and thought leaders. On this show, we dive deep to learn how things work at a technical level, and we fly high to understand visionary concepts and long-term trends. If you like Epicenter, the best way to support us is to leave a review on Apple Podcasts. And if you're on a Mac or iOS device, it's super easy. Just go to Epicenter.orgs slash Apple and that'll take you exactly where you need to go to leave us a review. Today, my guest is Simon Polaro, and he is the president of Adan, or the Association for the Development of Digital Assets.

It is based here in Paris and has a mission to promote the development of the crypto industry in France and more broadly in Europe. And as I mentioned here before, I'm a staff member of this organization as its communication director. Simon's one of the pillars of the crypto space in France. We met way back in the day when just a few people were talking about crypto here. We would often meet meetups and speak together on panels. And around that time, he co-founded Asset, which was renamed to Ethereum France last year, and I of course host the ECC conference in Paris. So around the summer of last year, he told me about this idea to create an industry body,

which would represent the French crypto industry. I was immediately on board, and we started working on the project. We recruited the early members. and we established the foundations for what would become a done. And it all came together in January of this year. And we now have close to 50 member companies and were a permanent staff of three people plus one intern. I wanted to get summoned on the podcast to talk about the digital finance package. It's a regulatory proposal that was drafted by the EU Commission and released to the public last month.

And since we got our hands on this document, we've been working hard to understand it, dissect it, and establish our positions with regards to this regulation. So the scope of this regulation is really broad, and it covers nearly every type of activity, which is related to cryptocurrencies, utility tokens, stable coins, and security tokens in Europe. In addition to being broad, it puts enormous restrictions on the defy ecosystem. It's not so that it restricts defy actors to do certain things or act in certain ways, but it simply ignores most of defy applications and use cases, and thus it makes it nearly impossible for defy to continue to exist in its current form. In the way that this regulation is currently drafted, it's difficult to see how defy stablecoins

like Dye could continue to be considered legal. And most of the innovative token issuance models that we've seen emerge recently simply couldn't interact with regulated exchanges. Since this regulation came out, our goal has been to put together a task force of companies and other European industry associations. And then from here with the right partners, we want to lobby at the EU level, which is, of course, a long and costly process. What's at stake here is the EU's competitiveness on the world stage. Of course, regulations should protect consumers and weed out bad actors, but at the same time, it should leave room for innovation and proportionality when it comes to crypto startups. So we went a little long on this one, but I think it was worth it

because it's important to understand what might be coming to Europe. But it's also a call to action to join us in our effort to preserve innovation and defy. And one of the ways you can do that is by becoming a member of Aden. So be sure to stick around until the end where we talk about that and other ways that you can support us and stay informed. The bit of housekeeping, we're hosting another virtual meetup on October 29th. It's at 1800 UTC, so that's 11 a.m. Pacific, 2 p.m. Eastern, and 8 p.m. in Western Europe. We did the last one in the spring, and it was lots of fun. There was about 30 people there.

We could just kind of chat and hang out together in a Zoom call. So please come and join us. If you want to register, it's at epizenter.rox slash meetup. Algarand is putting together a free webinar to show developers just what you can do with the platform. It's a one-hour tutorial, and it'll cover use cases like crowdfunding, asset tokenization, supply chain management and gaming applications. I'll tell you a little bit more about that later on during the interview. But for now, here's my conversation with Simon Polaro.

I'm here with Simon Polaro, who is the president of Adon. Simon, thanks for joining me. Thank you very much, Sebastian. So we were just saying before this, it's going to be a little strange because we know each other so well. And also, you know, we're used to speaking in French. And so this is going to be a little bit of a challenge for me and you to not like slip back into French and also these questions are a little weird sometimes, I think, because, you know, I'm trying to put myself in the position of, you know, a listener who doesn't necessarily know this

topic. And since I've been, you know, so since we've both been working very closely on these topics, it's going to, you know, I'll have to make an effort to sound like an outsider or to ask questions as if I was an outsider. Yeah, let's do our best. Yeah. So let's tell our listeners a bit about your background and how you became involve in crypto. Yes, of course. So I have a legal background. I was a lawyer before jumping in the crypto space and a tax lawyer more precisely. So I did a tax declaration, tax consultancy, etc. But I've always been very passionate about technology. And I had stumbled upon Bitcoin

quite a few times on news websites in, I don't know, 2011, 2013. I mined a few bitcoins in 2013. And then I just abandoned the topic. And I jumped again one last time, I would say, in 2015. When I heard about Ethereum, well, first I was just, I just wanted to buy a few bitcoins, just to invest a bit of money. but then I heard about Ethereum and about the smart contracts,

about everything surrounding automatic execution of transactions on blockchain. And I was really hooked. I think it was my legal background that just it clicked with me when I heard about the fact that you could do complex transactions on a blockchain that could be fully automated. And then you can audit the transaction afterwards. Well, it was really like, I was like, I was like, okay, this will be huge.

This will be very significant for the finance, for the value in general. So that's where I decided to, yeah, to be a bit more than a hobbyist and to create projects around the crypto assets industry in general. First, in addition to my work as a lawyer and then very quickly it became my full-time job. Yeah, in the beginning, I remember when, I mean, in the early days of Ethereum in 2015 and 16, I seem to recall that there were a lot of people who were, you know, like with a legal background that were looking at Ethereum and interested in Ethereum because of this notion of like automatic contract execution. And like back then, we had a couple of people on the show that were, you know, looking at Ethereum from that perspective. You worked at a law firm, and I'll let you talk a little bit about that part of your career and how it relates to crypto.

But were you finding around you that other lawyers or other people with a legal background, somewhat drawn to Ethereum for that reason? Yeah, yeah, definitely. It was very naive, I would say, attraction, because it was based on the best case scenario of what a smart contract would. one day become, but still, you know, it was the potential of the technology to, to be able to execute transactions automatically. That was quite a bit, a bit magic. As a lawyer, I was like, okay, there's so many legal implications to this. I need to research it. And at this time, I was one of the first lawyers that was really as technical on the subject. So I had quite a good understanding on the main concept, even if I'm not, I'm not a developer or something like that, or an engineer,

I was really interested also by the technical side. So I think that was what made me stick with it, even though, of course, the promises weren't there. So a lot of lawyers just abandoned the subject. But I still think today that it's still possible that the potential that we saw in 2016 will realize some time. And I think it's beginning to materialize right now. But it's true that when I first presented the crypto,

currency and the blockchain because the blockchain was the magic word at this time to my associates to the to the partners of the firm i was not a partner unfortunately but i presented to the partners and they were excited by the id and i think most of the lawyers that touched the subject at this time were excited by the idea but then after that of course there's all the realization that it's it's very very early and there's nothing much to do if you are not really involved in projects as a lawyer in the space. Algaran's running a free webinar to teach developers how they can use the platform to build sophisticated applications for use cases like crowdfunding, asset tokenization, supply chain

management, and even gaming applications. You'll learn how to get started with the command line tools and use the SDK and rest APIs. You'll also learn about the Algrant Foundation's grant program and additional funding opportunities that the Algarand ecosystem has to offer. So if you're building on a blockchain protocol that has unfeasibly high transaction fees and doesn't provide the speed you need, or if you work for a large enterprise or financial institution and are interested in learning how to build applications that could integrate in your current technology stack, or if you have no blockchain experience at all and just are looking to take that for a step into something new, well, this webinar could be for you.

Visit alleghran.com slash epicenter to sign up. Once again, it's free and it's happening on November 17th. But if you're listening to this after that date, no worries, you can still go to that page and watch the replay. We'd like to thank Al Garand for their support of the podcast. And so what was your role then? I mean, I know that you worked quite a bit in the early days of your career at this law firm and looking into the legal and regulatory implications of crypto, but particularly from the funding perspective, this was around the ICO boom. Can you talk a little bit about that? Yes, of course. So first, I was really attracted by the, by, you know, Ethereum in general, basically.

So I was quite passionate. I built a website called Ethereum France, basically talking about Ethereum in French. I wrote a lot of articles about all, all the aspects around Ethereum, ranging from how to buy Ether to what is the D-AAP, etc., etc. So it was really, the objective was to basically educate everything. everyone on what is Ethereum and the potential of it. And then I, of course, the more technical I became and the more involved in the project, I became the more I saw the potential of some projects. So I was really interested in following those projects and helping them also,

of course, in the legal side, even if it was really preliminary at this time. And I think the tipping point was DefContu when I went in Shanghai. high and made all those projects and all those people, passionate people who were building things with those really primitive tools, right? At this time, it was very difficult to build a project in Ethereum on Ethereum. That's where I think I saw the passion and I saw the community and I was like, okay, I need to be even more focused. And from there, you know, you're right. A few months later, the ICO craze started. I had the chance. and the opportunity to be an advisor for a few projects that I met at DevCon2, namely Iexec, for example.

And it was really, really interesting to see all those ideas becoming actual projects and are very good projects, right? I exec is still a very big component in the space. So yeah, that was really how the idea progressed and how I was more and more involved. And then at one point I was like, okay, I need to be even more involved. And then I quit my lawyer's job and I joined Variable, the Consensus Project. And it was at this time trying to build derivative products on Ethereum. So it was really DFI before DFI. Unfortunately, this project did not come through, but it was really a fantastic experience for one year and a half.

I joined an exchange platform, also a French exchange platform called LGO. And I worked a bit for them to develop their activities in France. And then Aden, that's where I had the idea of creating this association. So you see, I come from a legal background. But in those two startups, I was not the legal guy, not only the legal guy. I was really an operation. So I had the opportunity to see all the issues that you have when you try to create a project in the crypto space in France, specifically because I was based in France. And from there, I saw that there were very significant issues that needed probably to be solved at a more global level.

And that's where the idea of the association was born. Yeah, I remember when you first told me about this, I think it was in the summer of 2019 and around this time. There were other associations in France. There were a few. But the way I would characterize them is that they were enthusiast associations. And although they did a great job at educating people about crypto and trying to get people involved in the crypto space, there was not so much of a mandate to grow the industry and bring together industry players as a as a as a as a sort of force right and so this idea of adan came to you particularly to

create an industry body so can you tell us a little bit about what is the role of adan in the French ecosystem but also moving forward like what is the role of adan at a more supernational level at the EU level. Yes, of course. So basically, that's it. It's an industry body. The idea was really to make the crypto assets industry existing as an industry. Because before that, it was a few companies working towards some goals that were similar, somewhat dissimilar, of course.

And then there were competitors. But there was nobody to represent. the industry as a whole and to talk with public authorities, with private sector, with representatives, with other associations, as the representation of the crypto assets industry. And I think it was very detrimental to the development of the industry because there were no clear voices, they were no clear representative. And it was very difficult for everyone, except the digital asset sector, to understand what it was about and what were the issues we faced. and what we could bring basically to the economy

because it's a very specific sector of activity that's still not very well understood still today. Yeah, if you don't have someone to discuss with and to basically ask your questions too, it's very difficult to know more and even to know that this sector exists, right? So that was really the first objective. And then from there, of course, there's so many things to solve,

so many problems that the industry is facing right now. Just to develop its activity, we are working on accessing bank accounts for crypto assets sector, for example, and how those actors should implement KYCAML procedures, how those actors can finance themselves, etc, etc, and how the French public, the French state, but also the French private sector can help the industry grow, etc., etc. By the way, we should mention that Adan stands for Association for the Development of Lesothesites, which means the association for the development of crypto assets or digital assets. We chose to go with the name digital assets because we felt that that was kind of representative of, you know, the entire industry.

But the French crypto sector, you know, has developed since 2013, I think, or something like that, with the first exchange. And of course, Ledger being one of the major players here in France. France and sort of well known for what it's for what it's built over the years. Let you know, talk about a little bit about this, this political desire to, for France to be crypto country, right? Like this, you know, crypto first that we saw from the government in, in 2018, I think. Can you, can you talk a little about that context?

Of course. Of course. First of all I have to precise that. I think the first exchange was in 2011. It was Pemium, or the ancestor of Pemium at this time. BTC, what was it again? Bitcoin Central.

Bitcoin Central, yes, exactly. So it's even older than that. And I think it was the earliest exchange in the world, right? So that's significant. But yeah, you're right that the industry was seen in, I don't know, in 2008. 2018, 2017, 2018 by the government. Basically, what happened is that the regulator in France, the Authority of Marche Financier, they opened this fintech, this whole fintech department that is listening to fintech projects

and helping them becoming regulated. And because there was so much openness on this fintech department, the blockchain project, the crypto assets project, And France, they just went to the regulator and they presented their projects, whether it was an ICO, whether it was, we went to see them with a variable, et cetera, et cetera. So any kind of project went to see the regulator. And they were really impressed, right? They were like, okay, what's going on? What's this whole crypto asset sector that's developing in France?

Is there something significant to do there? and they built a knowledge as the regulator level that they passed through to the ministry, right? And the ministry, they saw this subject and they were like, okay, this is very interesting. Maybe there's something to do. So the financial market authority met all these crypto projects and then they went up to the economy minister

and was like, okay, here, there's something here. Exactly. And from there, there were like studies and of course they tried to better understand the sector, how it worked and everything and everything. And then there were the ICU boom that just made everything go faster, basically, because they felt like, okay, we need to do something,

we need to regulate, we need to, there's so many things happening there. And maybe if we are quick to give a clear regulation to their sector, that will help actor grow because they will know what they have to do, what they can do, what they can't do, et cetera, et cetera. So that's where the idea grew from, okay, what's this thing? We need to bring, well, to help the crypto asset sector grow in France. And this came into Frisian in 2018 with a law that called Pact Law that creates the whole regulation for the crypto asset sector.

And there were very positive political messages also sent at this time saying, yeah, we want a crypto nation, we want to build a dedicated sector of activity, etc, etc. So that happened. All this happened in 2018. But then, of course, there's time to apply the regulation. And the regulation came into force in France effectively in March this year. So now we have very clear legal framework in France for crypto assets actors, basically market actors. And also for ICOs, but yeah, on this, it's a bit late, right?

Yeah, exactly. Okay, that's enough about France. Let's, because our listeners might get bored with all this stuff that's very specific to France. But let's broaden it a little bit and talk about Europe and where there's a lot at stake here. And this is going to be the bulk of our conversation. We're talking, of course, of the digital finance package, which was drafted and released in late September. So just for context, what are the high-level principles of cryptocurrency regulation in Europe? What are the major frameworks that cryptocurrencies and cryptocurrency actors fall under in the EU?

Okay, there's a few big ways of regulating cryptos in Europe. Basically, we can dissociate to a way of regulating. The first one is considering that crypto assets are securities, all of them, and make them fall into the financial regulation in general. So that's the approach taken notably by Germany and a few other countries. So if you are operating, for example, a crypto-assets exchange in Germany, then you have to be a regulated financial exchange. That's as simple as that.

So that's the first way of doing it, which is quite easy to do, of course, but can lead to some inefficiencies and adaptation because the financial regulation is very strong and very difficult to apply for small actors like the crypto asset sector. And then you have the countries that try to create a dedicated framework for crypto assets. I already mentioned France, of course, did this, but you have Gibraltar, you have Malta, you have Estonia.

They all have like a crypto license where basically you describe your project and you have specific obligation that are adapted to the crypto assets and that may mention, for example, custody or this kind of issues that are very specific to the crypto asset sector. So these are bespoke regimes that are created by national governments in order to help players and sort of startups in the crypto space get started without all of the encumbrances and red tape and everything of a very complex regulatory framework

as exists in the financial space. That's exactly this. And then on top of this, there's a respective of the local regulation. There's an obligation for each member state to put into place regulations on KYCAML for all the, all the exchanges that deal with Euro and all the custodians.

That's from EU regulation. So it needs to be applied everywhere in the EU. It's the AML's 5 directive. Cryptocurrency startups in Europe are regulated at an EU level by AML5, which implies that every exchange or custodian conducts AML KYC on their customers. But other than that, other than this specific know-your-customer regulation, there hasn't been until now a framework at the E-E-level to regulate things like, you know, specifically, you know, how tokens are listed by exchanges or things like stable coins or

things like ICOs. Until now, these have mostly been regulated at a local level. Exactly. Okay. So let's now jump into this digital finance package. What is this digital finance package that was released by the EU Commission? And how does it change fundamentally this situation that we're currently in? Yeah. So the digital finance package, it's a big package, very, very big.

As its name suggests, it covers everything digital and finance. And the objective of the digital finance package is basically to make the EU competitive in an area where the finance is increasingly digitized. So it's very broad. And it covers, there's a lot of different regulations that covers a lot of different areas. But of course, what interests us is a few pieces of this regulation

that will concern specifically the crypto assets industry, namely the Mika regime, the markets in crypto assets. And then the pilot regime for the security tokens. Those are the two components that are specifically targeted to crypto assets in general. So basically, assets registered on a blockchain. And the idea behind this regulation is to consider the crypto assets as a very specific new asset class. So it's quite similar to the approach that was taken by France, for example,

that really considering the crypto asset as a different industry as the other one. and to create a specific set of rules, a bespoke regime, that will apply to those actors and to the assets they are touching. So that's what will happen. That's what the regime sets in motion. Every single crypto assets actor in Europe will be regulated by MECA. and every single issue of security token can use the pilot's regime, which is a very specific kind of sandbox for security token.

Okay. So when you say every single crypto currency actor in Europe will be regulated under Mika, I think we're going to spend most of this time talking about Mika because it's the one that concerns DFI more so than the pilot regime, but we'll talk a little bit about that. But when you say every single actor, who are you talking about here? Give us some examples of like who are the people who are the companies that are getting affected and regulated by this. Broadly speaking, Mika is creating a new category of actors. They called a crypto asset service provider.

So if you are providing a service with crypto assets, you are falling to this category. And it's very inspired from the financial regulation. So basically the crypto asset service providers are the custodians, trading platforms, exchange, execution of order, reception and transmission of orders of crypto assets. So if you look at the different financial services in MIFID, which is the financial regulation in Europe, just a copy paste, basically, adapted, of course, because there's the custody, but for the finance, for the for the crypto asset sector. So if you are providing a service, we are an intermediary, basically you're an exchange, you help people buy or sell crypto assets, you advise them on crypto assets, you will be regulated under this regulation. So you are a casp. And then there's a part of the regulation that is focused on the issuance of crypto assets. So any issuer of crypto assets will also be regulated, whatever the other.

the mean of issuing the crypto asset. And there's specific dispositions on stable coins. And this is a very, very sensitive topic with a lot of pages of regulation. Just to give you an idea, the whole regulation is like 176 pages. So just on mecca regime. And the stable coin part is like a third of that. So it's very, very significant. and there's obviously a focus of the commission on stable coin.

So there's crypto asset service providers and token issuage. So in crypto asset service providers, tell me if I'm right here, but we have exchanges, we have anyone who's a custodian, and we have any company that is providing services to holders or users of crypto assets. And then in the issuer category, we have, any entity that is by some means or another issuing or creating any form of cryptocurrency or crypto asset. Yeah.

Yeah. That's exactly this. Okay. So let's talk about what are some of the impacts. And I think the most interesting thing here is the issuance. I think the crypto asset service provider aspect concerns companies. that are somewhat regulated and probably would have been regulated anyway. Like we were to expect that.

So like exchanges, companies that are usually perhaps at the periphery between crypto and the traditional finance market. I mean, of course, there's also actors in there that would not have been like at this periphery. So but talking about the issuance. This is where I think it's particularly interesting because it's hard sometimes to pinpoint who is the issuer of a token. And there's a lot of kind of gray area there that.

even we haven't really been able to sort out how these participants would be regulated. So can you talk a little bit about, go into detail about that issuer portion, who it concerns and what are the challenges here? One of the things to have in mind when you are dealing with this draft regulation

is that basically the commission tried to cover everything. There's very broad definition and an issuer of crypto assets is basically any kind of legal entity that creates a crypto asset, whatever the means. And the first thing is that you will fall into the regulation as soon as you issue something and you sell it. You exchange it against Fiat or other crypto assets. And it's only if you are a legal entity that you fall into the regulation. So that's interesting because the first thing is that,

that any kind of ICO, basically ICO, of any form, right, of any of any significance will fall into the, into the regulation. So if you are issuing a token to finance your project, you will be regulated. But then if you are not a legal entity, you are basically excluded from the regulation and it won't apply to you. And that has some consequences, which we'll get into in a little bit. Exactly. Let's talk concretely about sort of projects that we know in the industry or like in the DFI space. Can you can you give some concrete example as to, you know, how some of the projects, let's take, I don't know, like you're in finance, for example, or a Dex or an, you know, an automated market maker like Uniswap. let's maybe kind of look at these different examples and how they would be regulated under MECA.

Those are very interesting examples. So for example, Uniswap, they have issued a token. They have sold a portion of it to its investors, attributed to its investors a portion of it. They have distributed with an eardrop a few of it to users of the Uniswop platform. and there's a few of the tokens that are attributed to the developers and the team and the advisors, et cetera, et cetera. So it's quite similar to a traditional ICO, except that the tokens are for free, basically. And what's interesting in the regulation is that there's an exemption to some of the obligations

of the regulation if the tokens are offered for free. But it's only applicable if it's really for free, right? if it's not given in exchange of a service or if it's not given in exchange for something that you've done for them before or something like that. So probably a part of the tokens would fall into the regulation

because they would not be considered offered for free and then you will have the full regulation applied. And then some of them may be considered as offered for free and then you will have some exemptions. But in any case, you will need to be a legal entity and to register yourself. And if you have the full regulation applying to you, you need to draft a white paper.

You need to, so that will describe all the issuance and how there's a few sections. Every section is detailed. So it's very detailed regulation. You have to notify this white paper to the authorities. You have to publish it and you have to comply with a few obligations that ensure integrity, honesty of the issuer. You have to provide with a 40 days delay.

where the consumer can retract is buy of the token, etc., etc. So basically what we can say is that this regulation covers a lot of different assets and it's really tailored for traditional ICOs. You know, the ones that we've seen in 2017 and 2018 with white paper, with a set of, you know, you describe the project, you say, I will sell X tokens for X price, there's a pre-sale, a sale, a post-sale, I don't know, and basically what we've seen in 2017 and 2018. And the obligations described in the White Paper sections really reflect this analysis. So what I can say is that this regulation is trying to regulate something that,

really does not exist anymore today. There's really, really, there's not a lot of traditional ICOs today. And all the token issues that we see are very innovative. So just stop there for a second because when you say a traditional ICO, you're talking about an ICO or one creates a project and is trying to finance that project by selling tokens to the community. Exactly. Okay. And that's what we've seen recently. That's not what we've seen recently, right? We've seen very different approaches. We've seen fair launches with a with a year in finance. We've seen adrobs with uniswap. We've seen so many different ways or NFTs that give rights to a token or a token that is adrop to someone who has used a protocol or another one. And those are educated.

that are basically falling in the regulation because you still are given a token and you kind of enter into the different criteria. But then it would not really make sense to create a white paper. So it's really, it's already something that's a bit an age case. But really what you have to have in mind is that this regulation was tailored for old school ICOs and it's not really suitable for the new ones, for the new token issuance. On the face of this, okay, you have to be a legal entity, you have to create a white paper. If I play devil with advocate here, I mean, that all sounds fine and good, right? It sounds fine and good to have a company that's issuing a token and that has, you know,

laid out its project in thought about all the different aspects of the project. And, okay, maybe it's a bit of a hassle to submit that to the regulator. but what is really what is really the problem here and how will it negatively affect the industry do you think well that's that's really the fact that it's as you said is it's good to have a regulation that basically covers the token issuances that are targeting the general public and that will sell a product in exchange of money and that will create, you know, it's basically a funding of a project, a high risk project by the general public. And that, that of course needs to be regulated and that's, that's of course very important. But then the regulation is very, very broad and covers

all the kind of token issuances, including those who are very innovative and that do not target the general public. And those token issuances may have some problems in Europe. So that's basically it. Okay. So you're saying that a project with an innovative token model may not be able to particularly like particularly articulate very well the project in a white paper. Like what is the, what's at the crux of the issue here?

Basically, they won't be able to respect the sections of the white paper. they have to respect, right? Because in the white paper, you have sections and you have to declare the white paper before the operation. You have to declare a period of issuance. You have to declare a fixed price of the assets, of the assets for a certain period of time. You have to explain all the risks you are taken. You have to explain.

So if you compare this to how, for example, year in finance was launched, of course, you won't be able to describe all those conditions. in a traditional white paper. So that's something that would be very difficult to, basically that would just render those operations out illegal in terms of the EU law, which means that the issuer would be considered as breaching the EU law. And the tokens won't be able to be listed in EU regulated exchanges.

So that's maybe the most important consequences that you could have. We'll get to that part in a little bit. So essentially, if we recap here on this white paper requirement, what it does is it creates a framework, a very rigid framework that is mostly targeted at what we described earlier as traditional ICOs. An innovative new type of token issuance model simply won't fit in that framework. They won't be able to comply with the different sections of that framework simply because they can't,

simply because there is no such thing as maybe a sale price for that token or there simply isn't room for that framework for those projects. And so therefore all of the other consequences like, for example, not being able to be listed, which we'll talk about in a second, would not be fulfilled. Yeah, and I think it's a very broad remark that we can say on the regulation. And maybe we should have started with that is that the regulation was really thought and built for centralized actors and traditional actors that are equivalent to financial actors. So the reasoning of the commission is that there's this new asset class called crypto assets. There's this new type of actors that are helping others buying and selling them and issuing them and who are even issuing them themselves. And we should just regulate them. So they have this approach of the crypto asset sector that is basically a pseudo similar to the financial sector and that you just need to basically replicate the rules of the financial sector to the crypto assets.

sector and then everything will be fine. You just adapt them. You just made them more progressive. And that's it. And that's really how the regulation was thought about, I think. And in passing, most of Defi falls to the side. That's the main issue because, of course, there's those actors in the crypto asset sector that are similar to the financial sector actors. They exist. And of course, Cracken and then and then coin house and then and then bit stamp, et cetera, et cetera. They are, they can be considered as similar to financial sector actors, right? But yeah, that's the whole point of the blockchain of being decentralized and to have

those use cases that are more on the control of the user or the control of the, the person who are using the protocols. Permissionless innovation is what you're referring to. Yeah, exactly. Permissionless. You can create tokens just by interacting with a smart contract that was deployed by an anonymous person. You can intricate all the use cases together to create new products. You can access to all those use cases without any kind of permission and any kind of legal entity.

and those use cases that developing quite rapidly those days are completely out. It's not that they are out of the scope, but they are out of the reasoning. They were out of the reasoning of the commission when they built the regulation. And the issue is that they were out of the reasoning, but they are not out of the scope

because the scope is so broad and that it covers all. all the use cases when you are talking about issuance. So by having a broad scope, many defy applications and use cases are covered by the regulation, but they are not taken into account in a way that makes them feasible in Europe. Yeah, that's what I think anyway. So maybe there's a point of views.

Yeah. Let's talk about stable coins before we get back to crypto asset service providers or casps. So what are the risks to stable coins? I've talked about this on the podcast a little bit, but I really want to get into the bulk of how defy stable coins like die are threatened by Mika. The stable coins issue is a very political one, right? In general, all the international institutions are looking at stable coins,

either to issue some, if you are talking about central banks, or to regulate or to limit them, etc, etc. So there's the Financial Stability Board that has issued a paper on stable coins that raised some risks. There's a paper on stable coins from the Central Bank of Europe, etc, etc. So the G7. So that's all those interests in the stable coins was raised by, of course, the LIBAR project that was announced a few years ago. And the approach now of the stable coins by all those institutions is very defensive.

So basically, the stable coins are seen as a potential threat to the financial stability of the financial sector as a whole, which is quite a big threat, right? So the approach of the commission is to regulate every single asset that tries to replicate the price of another asset and to regulate it very, very strongly. Asset reference tokens. Yeah. So this is a new kind of token, a new definition, completely new, because you know, you had those definitions that were passing around on different

institutions of UTT tokens, payment tokens, etc., etc. And the EU decided to create a new way of considering the tokens. the stable coins. And basically, the definitions is focused on the reference price. So as soon as you issue a token that has a reference price, so the target price, basically, you are targeting this price that is another asset. Then you fall into the regulation. And that could be a crypto asset or any other asset. Yeah, the collateral, the way you maintain this value, the way you try to reach this value is irrelevant on this definition.

So, for example, you have USDC or USDT that are tokens that are backed or supposedly backed by real assets. So one USET, USDA is supposed to be backed by one dollar in value. And then you have the dye who is issued by a smart contract

and who is backed by crypto assets, namely ether or WBTC, etc. And there's a system in the smart contract that ensures that the value of the collateral is always more than 150% than the value of the die issued. But those two would be considered as an asset reference token or more specifically e-money tokens because they are targeting the dollar,

which is a fiat currency. And they would fall fully into the EU regulation with a lot of obligations that are completely, by the way, but we'll see on this together, completely impossible to respect by the die. Let's talk about some of these obligations and why are they impossible to respect. But I feel like in the case of die, I think, which is the one that is stable coins like die are particularly hindered to see the least in the case. this regulation. Yeah. So as I said, the approach is defensive. So the asset reference to tokens or e-money tokens are banned if from being traded

in the EU or issued in the EU if they don't respect all the regulation. And again, the regulation was built with in mind centralized entities. that have a legal entity that have assets that have personal, that basically can fulfill some obligations by respecting some very specific criteria. And for example, to issue electronic money tokens, you need to be authorized as a credit institution or e-money institution. so you need to respect the financial regulation. You need to provide all the holders with a claim on your assets.

You need to allow for the redemption of the token at any moment upon request of the holders. You need to invest the funds in secure low-risk assets that are denominated in the same currency as the one referenced by the token. you are issuing. So those obligations are the obligations of electronic money token that would be backed by the same currency as it is issued in. So you said something there that I want to just kind of stop on for a second because it's so interesting. So with die, for example, the issuers of die, whatever entity that is or whatever entity the regulation would decide that is, would need to provide to their to die holders the promise that they can redeem not ether but that they can redeem usd for the equivalent amount of their tokens that that's essentially what the regulation says yeah yeah

yeah that's exactly what the relocation says so basically the regulation is extremely broad so die would fall into it but the the obligations that they put on the issuers of the tokens are such that it doesn't make any sense for the die because of course the die doesn't have dollars backing any die that's the whole point right so if you if you force the die to respect those obligations you're basically banning them from the EU as a whole because they won't be able to respect the regulation or that wouldn't be die anymore Okay. So once again, we're in a situation here where the regulatory framework is very broad. It applies to, you know, it applies to different types of cryptocurrencies, including stable coins. But it doesn't make certain types of activities feasible. Exactly. And another funny thing is that that's not very funny. But you cannot serve any kind of.

interests on stable coins in general in the EU. That's part of the regulation. And this means that basically any kind of defy products that would include the serving of interests of any kind of stable coins would be considered as illegal in the EU. So you see, there's a few very significant issues in the regulation. The general framework and the general idea of being protective. and to protect the consumers are really, they really make sense, right?

Because, of course, it's very important if you issue a token and you say it's worth $1. I have $1 in my bank account. There's some kind of regulation that ensures that, of course, the guy has $1 in the bank because he said he had. And there's some kind of authority that should be able to check this. And this is very important because it's not, really the case right now that all the stable coins issuers are regulated so so so clearly and it's not

so clear that there's always this this funds backing all the tokens issued and we see where the fear come from right because the regulation of course is a is a risk based approach so you see a risk you see a risk that the token is not properly backed so you issue a regulation that makes sure that everything is properly backed that that makes sense What is the problem here is that this, again, we are in the blockchain space. There's so many innovative use cases that are decentralized, that use new ways of creating value and etc. And those are completely not considered by the regulation, but still in the scope, which is, this is really the problem, right? If they were not in the scope, right?

Okay. You can have all your decentralized use cases. is happening outside of the regulation, and that would really make sense. That's how it happens today, for example, in France, where the current regulation does not include decentralized use cases. But that's not what the Commission did. The Commission defined the different use case in such a manner

that the decentralized use cases fall into the scope, but they cannot respect any obligation, of course, because they are decentralized or semi-decentralized. Yeah, I think that is what's so frustrating about this, is it this regulation, it's called the digital finance package. One of the things that they claim is that this regulation, it aims to promote innovation in Europe and to make the EU more competitive. But in fact, it just, it squashes an entire,

industry or at the least makes innovation in that industry crawl to a stop. And that's what's just so incredibly frustrating. So let's talk about the part that puts the nail in the coffin here. And that is how the obligations on issuers is taken into account with regards to crypto asset service providers and how it's really the crypto asset service provider rules that block access to the markets for any of these assets that don't comply. Yeah. So it's a very simple rule that's defined on Article 68 of the regulation that basically says that if you are at trading venue and you have to decide which assets you want to list,

one of the rule you need to apply is that the assets must have respected the white paper obligation and must basically have respected the issuers obligation of the crypto assets of the MECA regulation. So if the asset did not respect this regulation, you are supposed to ban it from your trading venue as a matter of principle because it's not compliant with EU law in general. So basically the consumers in the EU zone should not be able to trade it, which means that the centralized entities won't be able to list assets like the die, of course, because completely banned of the EU in general,

and all the other assets that would be issued without respecting the issuance obligations. So we need to, of course, we need to remove this Article 78, and we are trying to do this 68, sorry. So any crypto asset that doesn't comply with Mika, which has not complied with the white paper requirements that we talked about earlier, or, for example, stable coins that don't comply with Mika because they simply can't, should not and cannot be listed on any regulated exchange in Europe. Yeah, that's it. Exactly. Okay. And it's even harsher for the stable coins because the stable coins, again, everybody's

afraid of them. And the stable coins, there's penalties for just issuing them. And they're really, really banned from the EU if they do not respect the regulation, right? Okay. So let's take two examples here. Let's take the example of regulated exchange like BitStamp and EU exchange, but any other exchange it operates in Europe like Cracken or Coinbase or any of these other ones versus a Dex.

How would this regulation affect these two types of exchanges differently? Well, the first type of exchange would need to be regulated under MECA and become a CAP. So crypto asset service provider. As soon as they target the EU market, in any way. So if they do marketing, if they are basically selling the products to the EU consumers, they have to be regulated in Europe.

If they have EU customers. Yeah. That's the scope of the regulation. Well, it's not only having EU customers. It's we're targeting them. Because if the consumers go and see you without you targeting them specifically, then you are fine. But if you do any kind of marketing in the EU, then you are in the scope.

And of course, if you are located in the EU, you are in the scope. So those entities that would fall in the scope need to register, need to, there's a whole approval process. You need to file a documentation that explains how you respect all the obligations of the GASPs, in terms of organization of your activity, the guarantee you provide to your customers. the currency on the price, on the market practice, etc. There's market abuses, rules, etc, etc. And you would need also, of course, to respect Article 68, where you define the products you can list on your crypto assets,

on your crypto asset service provider. And you need in the rules to exclude all the tokens that are not in the scope of the regulation. so you would not be able to list all the defy tokens, all the stable coins that are not regulated in Europe, etc., etc. If you are a decentralized exchange, but a truly decentralized exchange like UNISWab, for example, of course you don't have any kind of legal representation

and you don't have a marketing service. So you won't fall into the scope of the casp. and of course you won't be affected. So those decentralized exchange would probably continue to exist. There's the question of how the legal entities that would basically create and deploy those services could be affected in a way if those assets are used to trade assets that are not permitted in the EU. but it's not really clear in the regulation if there's a way to affect them. So probably the D5 products would be functioning normally.

But then the centralized entity, which are the gateway, right, to the crypto assets world where you can exchange your euros against crypto assets, they would need to be fully compliant with the caste rules. Okay. So a sort of centralized exchange.

or exchanges that we typically see as centralized exchanges, we'll need to register, we'll need to fulfill several requirements, but at the same time, we'll need to forego listing any token that does not comply with the regulation. A decentralized exchange could potentially keep listing those tokens, of course, it's hard to enforce any of that on a decentralized exchange. So if you have a Dex, for example, that has a governance model which decides on which tokens get listed, it becomes nearly, I think, impossible. to really enforce any of that. But there is still a question of what would happen to the legal entities, which may or may not exist. But if those legal entities do exist, what would happen to those? And even if there's no legal entity, I think we've seen in the past that even individuals or groups of individuals like open source developers or whatever could be targeted in terms of an enforcement action, don't you think? Yeah, yeah, exactly. And this is more the uncertainty here that is damaging, because it would be very complicated.

You know, it's already very complicated to convince the EU VC to invest in crypto assets industry compared to, for example, a US-based VC. But if you don't have any certainty on the legality of your activity and on the fact that maybe you could, be considered liable for the exchange you are deploying on the main net, for example. Of course, this will be detrimental to the development of the industry in Europe. Yeah.

How does this affect mining and staking? Does the regulation touch any of that? Yeah. There's a specific exemption from respecting the white paper obligation if you are issuing your token by ways of mining. But really mining, there's no. mention of staking or and then there's no definition of mining actually so we don't exactly know how the commission sees mining yeah and what's what's telling about this paper is an entire paper

there's it mentions mining once and it mentions that exemption but it doesn't defy it or anything like that to exclude from the obligation yeah and also it's really it's not really clear how it really affects the operation because Because most of the assets that are mined are not issued by a legal entity, right? So they are already out of the scope of the regulation completely, which again raises the question of those assets. Could those assets be listed in the EU? So for Bitcoin, for example, Bitcoin is mined, but it is not a legal entity. And the way the regulation requires that assets are issued by a legal entity. So there's the question of whether Bitcoin or even Ether could be listed in the EU.

Yeah. So they will be able to be listed presently because they are transitional dispositions, which means that if you did not respect the regulation before it came into force, well, of course, you cannot be sanctioned because you didn't know of the other regulation that did not exist at this time, right? But this means that if a new Bitcoin was issued like a month after the regulation came into force, then it would probably not be able to respect the obligation and then could not be listed on exchange. And what's really interesting about this paper too is that it never mentions Bitcoin.

It never mentions it. It never even says the name of the currencies that it might be regulating. It just seems like there's just an oversight. of the entire defy space. Like, let's regulate crypto, but let's just pretend that defy doesn't exist. Isn't that the kind of message that comes through when reading this paper? Yes, it's true that it's very telling that there's no single mention of any, even the word cryptocurrency is not there.

There's no Bitcoin. There's no ether, of course. There's no cryptocurrency mentioned. There's the terms crypto assets, the terms utility tokens, utility tokens, asset reference tokens, e-money tokens, and security tokens. So that's the vocabulary of the commission. And it's very telling that they basically try to avoid the whole problem of characterization of the crypto assets by putting together everything except the security token and the stable coins.

But everything else is like a huge, not very clear group of things. assets and everything is treated in the same way, which makes sense if you, if you don't want to discriminate or to go into too much of the details on how the things are built, issued, et cetera, et cetera. And of course, there's such complexity on the different assets that really makes sense to have this broad approach. But then you should be very, very careful if you do that to avoid side effects. And they obviously did not do this as we would be. like them to do, as we would have liked them to do. So we've talked about the issues with compliance. We've talked about the listing of these tokens

or the ban on listing these tokens, which is kind of the nail in the coffin. And then there's just, there's the part of this regulation that seems like such a middle finger to the entire crypto industry, which is the affordances that this regulation gives to incumbent finance financial regulated institutions like banks, describe what kind of leeway this regulation gives to financial institutions? Well, it's really logical. If you still, again, if you have this broad approach of the crypto assets being a new asset class in the traditional financial sector and having this view of the crypto assets,

actors as being some variation of the traditional financial sector actors, then of course the conclusion is that, yeah, why not granting to all the traditional financial institutions a full access to crypto assets with no specific obligations? And that's exactly what they did. So basically if you are trading the new or if you are a broker or if you are any kind of regulated bank, if you're any kind of regulated financial institution under the EU regulation, you will have automatic transcriptions of your activity to your closest crypto asset activity. So if you are trading, traditional trading venue, you will be able to operate as a crypto asset trading venue. If you are a broker, you will be able to act as a crypto asset

broker with no additional obligations, with no delay. And that's, of course, if you take the point of view of the crypto assets industry, it's really, it's really harsh because basically the commission is narrowing the space to what they understood it was and just bans all the use cases they did not see, which is already quite bad. but in addition to this, they just opened the law to the crypto assets industry to all the traditional financial sector actors, which of course creates quite a big, very quickly quite a big competition in the space. Of course, if they are interested, but we will suppose that they are. This means that basically any bank can become a crypto asset custodian.

any, yeah. So it's true that it's seen as, you know, the final blow for the crypto asset sector in Europe for the actors that are already in place. It's not very positive. It does seem like a final blow. It seems very unfair to give to the existing financial sector all of the leeway to be a crypto asset service provider without any of the red tape. but also for companies and startup in the crypto space or who are entering this crypto space, they will need to do additional steps. So they will need to register. They will need to interact with the regulator in order to get the proper licensing, et cetera. And who knows what that's going to look like? I mean, if we have any experience with dealing with administration in Europe,

it's that things are usually slow and take a long time and cost a lot of money. So there might be some bottlenecks there that are like additional pains and costs for industry players. Yes, I can only agree on this that the procedure and the cost of the procedure and everything is a high burden on the newcomers, the crypto asset sector players that are trying to create this new sector of activity. So, yeah, maybe just to be a bit less grim about the whole thing. Please. Yeah, just on the bright side, I haven't mentioned it and I think it's important to do it. It's still good that the crypto asset sector was seen as an industry sector that exists as a whole,

as a new kind of asset that can help reshape the financial industry in. euro because that was the initial that that's where the whole regulation comes from right there's this idea that there's interest in crypto assets and they need to be regulated so they can grow in a more precise and yeah reassuring constraints but yeah it i think that the fact that this regulation exists is still a good sign as being a recognition of the industry as a new industry. I don't see it that way at all. I see it more as a recognition of threat. I mean, I see it as a recognition, but it recognizes that the crypto industry is a threat to the existing financial sector. It's a threat to incumbent players. There might also be in there some consumer

regular, you know, consumer protection, anti-money laundering and sort of financial terrorism considerations, but I think for the most part, this was probably drafted to give recognition to an industry, but also make sure that that industry, you know, complies to the will of traditional financial sector. Yeah. So I think the first part of your sentence is good and then it's less good. Yeah, it's true. I think, you know, it's always the issue when you create a regulation at such a high level as the EU

Then you have so many actors that are already in the place, right? The incumbent players, they have all the lobby, all the relationships they can in the commission. And they already know how to bring their IDs to the commission and to make them understand what are their views on the subject. So, of course, the first draft could not be the perfect draft for the crypto assets. sector. Still, I think it's good that we have this initiative. It's really important to say that, I'm not sure we say that already. It's the proposal of the commission. It's the first step of the legislative proposal. And from there, there will be the parliament that will amend the text,

and there will be the council that will amend the text. And then there will be the trilogue where the three different institutions will discuss together to create the final version of the text. And there's probably a lot of room for change, especially before the parliament, maybe less before the council, but still there's probably things to change at this stage also. And I think the good news is that all the crypto assets players have spoken to, but also the French regulator and the French actors and even the French financial industry thinks that this first version of the text is too stringent and not really good for innovation in Europe.

And I think if we can convince in a short amount of time because unfortunately there's a very short procedure, the procedure will be very, very, very quick, we have a short amount of time to convince as much players as we can that this regulation should be amended. This regulation should be basically refocused on the centralized actors and also made more proportionate for these actors. I think those are the two most significant things that need to change.

And those are arguments that can be heard by a lot of people, right? It's not stupid. It's really, it makes sense if you understand the industry that those things need to happen. So there's still hope, I think. And that's what we are trying to do at the Aden and with different European actors to make the text change and to make it a more suitable text for the whole industry. So let's talk then about the actions that are being carried out by Aidan

and in coordination with other industry associations in Europe. Yeah, so there's a lot of initiatives. The first and the most obvious one was to, of course, raise our issues at our own national level. We're based in France. So, of course, we've seen the French regulator, we've seen the French Ministry of Economy, etc, etc. And we raised our issues. They were very receptive, so it's a good first sign, I would say. and then we are building cooperation between different associations and industry players in Europe,

as broad as possible, to help them also raise those issues at their own national levels. And together, we would like to raise the same issues at the EU level, which is quite a challenge because we have a few initiatives existing in Europe already that raised the voice of the industry at the EU level, but not really like an organized lobby that would be already introduced and that would be able to pass those ideas with the legitimacy of industry body.

But still, they are really looking forward hearing from the feedbacks from the industry. So as soon as we can reach them and bring them those issues we phrased, they should be at least listening to us. I think the main challenge we face is more like an education challenge, right? Because it's really difficult for someone who has not been in the crypto space for a long time to understand how different those decentralized use cases are from the centralized actors

for the whole DFI space. and how critical are the stable coins in the crypto space economy right now? And those two points need to be completely understood by our interlocutors before we can go to the next level and make our proposals. So that's one of the reason why the actions we are planning for include a huge focus on education and maybe it's more explaining our vision than sending them drafts of amendments that would not make sense for them. What are some of the things that, like people listening to this here, whether they are in Europe or even in the US or anywhere else,

if they have users in Europe or if they're issuing a token that could potentially reach EU, users, there's a high chance that they will be affected by this regulation in one way or another. What is your message to founders of companies, people who work in the crypto space in order to have this regulation be amended in time before it gets passed and potentially wreaks havoc on the crypto industry in Europe, but also I think it may have reverberations outside of Europe? Yeah, well, I would say reach out to us first. I think the initiatives needs to be a bit coordinated at a minimum, just that everyone knows what are the big timelines, who are the interlocutors that needs to be actioned, who you can talk to, who is who will defend our positions, who is opposed to the crypto assets industry, etc, etc.

So it's very important that we talk to each other and that all the initiatives are made in general. If you don't have a clear idea of what you want to do, if you don't have any initiative in mind, we can help because we are in the process of structuring a really focused initiative that would be the voice of the industry at the EU level. and any help would be very much appreciated whether it would be in your time, in your knowledge or even the financial help, because it's very costly to reach out to the EU. You need to pay different interlocutors to be able to reach out to the right person. And I think either you can reach out directly on the EU sector or if you want to help bringing

more awareness on the industry in general in Europe and you want to help the Aden, you can also, of course, become a member of the association. And then the fees you would pay as registering as a member would help for all those actions at the EU at the French level. So, of course. Yeah, I would, I'm going to put my Aden hat on now. And I'm going to say that, you know, anyone who's, who thinks they may be concerned by this, whether they are in Europe or they have any dealings with Europe and are in the crypto space, we should probably be just sign up for the Aden newsletter. We send out a newsletter every month where we kind of outline all the things that we're working on.

And that's a good starting point to get some more knowledge and get more in touch with what's happening at the EU level. And of course, whenever we host events or, you know, publish blog posts about these topics, you'll get that newsletter. you can get the newsletter at adan.eu. That's a d-a-n. dot EU. You'll get a pop-up when you sign up.

And of course, you can also reach out to the association through the website. We'll certainly be glad to speak with you about any concerns you might have, but also ways in which you can help. But yeah, the newsletter, I think, is a great resource. And it goes out what's a month. It's in French and in English, it's quite concise. And is a good way to keep your, finger on the pulse. You know, one maybe final thought to end on here, and I wanted to talk to you

about this a little bit, is like if in five years from now, for example, Mika has passed and it looks a lot like the regulation that we have seen so far, right? If it's hard to get those amendments through and we basically get this regulation that stifles innovation in DFI, do you think there's an opportunity to create a totally alternate crypto ecosystem, a crypto ecosystem that would emerge organically as, you know, outsiders of this regulation and create a truly parallel financial system to what we have today, which is kind of like the, you know, the starting goal of Defi and the crypto space. Do you think that there's an opportunity for that? I think it's quite possible, right? Because the tools are already there to create use cases

that do not really need regulation to exist. The pain point is really like the entry point and the exit point, right? If you want to buy cryptocurrency for the first time, you need an entity that has a link with the traditional financial sector. But as soon as you're in, you have all the tools already in place to have your whole financial life, that you can create stable coins,

you can exchange coins against each other, you can create derivatives, you can loan, you can borrow. All those use cases already exist and they can't really be stopped by EU regulation. So it could very well be a side effect of misplaced regulation that all the innovative side of the blockchain space becomes a shadow side of the blockchain space in Europe, specifically.

And in parallel, there will be the whole traditional financial sector that would take its place in the EU market with all those affordances they have. So it would be quite a strange situation where all the crypto assets proponents would be pushed out of Europe and would probably build those products with legal entities that are located outside of Europe

just to avoid any kind of risks and all the users would use them from Europe with no limitation because it's just, for the just cases, right? And then you would have all the incumbents that would enter the markets and just provide very simple services like buy and sell, crypto assets that would be fully regulated. So that would completely change, I think, the face of the market if the regulation would apply as it is right now.

And that's funny because that's already something we've seen. seen with the problems we have with the opening bank accounts. You know, there's, it's already a big issue in France specifically, but I know it's the case in a lot of different European countries. If you have crypto assets, it's very difficult to open a bank accounts because banks don't want to deal with crypto assets in general. So more and more, with the tools that are existing, I see that members of the Aden, new members, they are asking me if they can pay in stable coins.

directly the fees for becoming a member because they don't have a bank account. They are already out of the system, right? They've built all their use case without a bank account. They are financed by crypto assets. They pay with crypto assets and they don't need a bank account. So it could very well be that this regulation, if it's not amended to be more suitable for the crypto asset industry, it will accelerate this movement. and create entities that are completely out of the system

and that operates without a bank account, without any link to the traditional financial sector because they won't need to do it and they won't be able to do it. That's, I think it's a good note to end on. At least maybe there's some positive outlook here anyway. We'll link to the then website, the newsletter. Also, we recently hosted a webinar about this very top.

in which we go into, you know, lots more detail about the technical aspects of this regulation, which I'll also link to in the show notes. It has the webinar itself, the slides, and a nice recap. So that's a nice amendment to this podcast. Simon, thanks very much. Thank you, Zavisian. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you listen to podcasts. And if you have a Google home or Alexa device, you can tell it to listen to the latest episode of the Epicenter podcast. Go to epicenter.tv slash subscribe for a full list of places where you can watch and listen.

And while you're there, be sure to sign up for the newsletter, so you get new episodes in your inbox as they're released. If you want to interact with us, guests or other podcast listeners, you can follow us on Twitter. And please leave us a review on iTunes. It helps people find the show, and we're always happy to read them. So thanks so much, and we look forward to being back next week.