Shaping Up: MiCA 2.0, US Policy, and Crypto's Regulatory Picture | DAS London 2025 | Day 1 | Main
Summary
UK Crypto Regulation: The UK has a significant opportunity to become a leader in the crypto space due to its adaptable legal system and financial ecosystem, but needs to accelerate its regulatory and policy efforts.
Regulatory Challenges: The UK's Financial Conduct Authority (FCA) is working on a comprehensive regulatory framework for crypto assets, but progress has been slow, leading to concerns about losing momentum and competitiveness.
Stablecoin Regulation: There are ongoing discussions about stablecoin regulations in the UK, with concerns about proposed caps and their potential impact on the market, as well as the need for alignment with international standards like MiCA in the EU.
DeFi and Regulation: Decentralized Finance (DeFi) presents unique regulatory challenges due to its decentralized nature, and there is a focus on defining control and regulating frontends rather than protocols.
US-UK Collaboration: There is a growing collaboration between the US and UK on crypto regulation, with the potential for a regulatory corridor that could enhance competitiveness and innovation in both markets.
Global Perspective: The panel emphasized the importance of international cooperation and interoperability in regulation to ensure a seamless and effective global crypto market.
Opportunities for Innovation: Right-sized regulation is seen as beneficial for innovation and investment, with a call for leaders to engage in public discourse to harness the potential of new technologies for societal benefits.
Future Outlook: The UK and US have opportunities to lead in crypto regulation, but need to act decisively and collaboratively to realize the potential benefits of digital assets and financial technologies.
Transcript
Good morning everyone. Thank you ever so much for joining this early panel on the first day of the conference. It's my pleasure to have a conversation for the next half an hour or so with a panel of global experts on regulation and the policy environment. We have a wellrespected pit, a UK regulatory expert and a highly respected and experienced global crypto lawyer on this panel with us today. I'll ask them to introduce themselves shortly, but let me quickly set the scene for you. It's been over three years here in the UK where Crypto UK was instrumental in getting a positive policy position for the UK to be a crypto innovation hub. We'll discuss how that's been going and where we are today. We'll also talk about a number of other jurisdictions, especially the US and we'll also look to Europe. I have no doubt that you'll find this early discussion on the first day of the conference a good starting point for ongoing discussions this week on how I believe as I'm sure my fellow pan panelists do we have turned the corner from being a cottage industry into the start of mass adoption for our technology. Okay, so let's start with introductions if I go to the end of the line and ask Lord Holmes to introduce yourself please. Thank you very much indeed Ian and what a great pleasure to be with you this morning. I'm Chris Holmes Lord Holmes. I've been in the House of Lords for 12 years almost to the day and my areas are leading on all things new technology, AI, blockchain, DT, cyber, and all things digital assets and tokenization with the golden threads of EDI and ESG running through all of that. Thank you. Uh I'm Rebecca Reic. I'm the chief legal officer at Judo Labs. Um, Judabs builds infrastructure for the Salana ecosystem, but I've also been a lawyer working in the crypto space for many, many years at this point. And because I had been uh working on the technology and uh have a traditional financial services background on the legal side, have been doing a lot of policy work including with Ian in the UK, in the EU, in Asia, and of course in the US. Uh, and we don't really have anything settled, so there's a lot to talk about today. Thank you. Hi. Um, I'm Lauren Navaratnam. I am the UK policy lead for the Crypto Council for Innovation. So, we're a global members association. Um, I've been with CCI for about two years. Um, in terms of my background, I spent seven years at the FCA. Um, where I looked after their the innovate team, so their their fintech team, which was originally where crypto policy started out in the FCA. Great to be here. Thank you everyone. What a wonderful panel. We don't have any questions. So, if you do have some questions, please do doors stop us afterwards or we'll be around for most of the day. Okay, let's kick off with with Lord Holmes here. Sort of zooming out from the top level in the UK. You know, as a peer and longtime supporter of many novel technologies such as blockchain and AI, can you give the audience a sense of the UK's current position with regards to the crypto industry and also share some of your personal views on how we could perhaps be better? Certainly. And thank you again. First and foremost, I really should health and safety we should focus on first really. So, following Saturday, how's everybody's blood pressure? Yeah, what a day. But we're all here and the future is now. There's a lot of talk about what's happening in the UK and there's no question that if you want one sentence to lay out what we need to do in the UK, we need to get on with it from a regulatory, from a policy, from a leadership position. Because we have an extraordinary opportunity in this space. Why? First and foremost, because of the great good fortune of English common law. adaptable, dynamic, stable, well understood, used in jurisdictions right around the world. Secondly, we're right in the heart of the city of London here this morning. What an extraordinary financial services ecosystem. Third, our great higher education and technology ecosystem in London, but right across the country. So we have all of the ingredients, but it would be fair to say that we haven't applied the pace that we need to when it comes to showing the leadership and the regulatory landscape that we need to optimize in this space. And critically, we know how to do this. We know how to do right-sized regulation. We know how to do regulation legislation that's good for innovation, good for investment, good for consumer, good for creative, good for citizen. I took the electronic trade documents act through the lords and early this year took the property digital assets bill through the lords which is still in the commons this autumn. If you want to know more the detail of those bills do come and see me after this. Honestly they're more interesting than their titles might suggest. But being in a position to have extraordinary success doesn't mean that it will just naturally come to us. We need to act. We need to do stuff. I was with the economic secretary to the Treasury last week. And some positive signs coming out of government. They're suggesting that a policy framework for crypto may be in place by the end of this year. I think it probably will be a little bit uh beyond that. ETN's being allowed in innovative ISAs, a good move, but probably not far enough in that space. Work on digit, the uh sovereign digital guilt procurement out for that last week. Positive, but still needs more pace. And we need to always view this in the global context. This isn't a UK play. We're in a global market. We couldn't be in a more global 247 realtime environment. Saturday showed us that clearly. But ultimately in short a stunning opportunity for the UK in this space but that opportunity needs to be taken by legislators by regulators and crucially then connecting and communicating to everybody right across the country and beyond because what I really want and what interests me the most about all of these technologies is we need them to be mass participation technologies, mass participation, financial services, mass participation opportunities because that's how we can really enable people right across society. But if we look at some of the sharpest ends around financial exclusion and digital exclusion, if we get these opportunities right, not least with digital assets, we could really start to address some of those most significant issues that have dogged our society and ruined lives for decades. Well, thank you uh Lord Holmes and and from the community a huge thank you for all the efforts that you highlighted there especially for the digital property rights bill which is a first of its kind propriety piece of legislation that helps with clarity for our industry and also you mentioned the new economic secret to the treasury. I keep trying to get in her diary and I invited to this event but she hasn't picked up on the offer yet. So, so maybe if you bump into a in the parliament of state, could you mention that we'd like a meeting? But um okay, that's the policy and the government have been supportive issuing primary legislation. Now, let's move to the hard task of actually writing the regulatory um guard rails. Laura, so let's look at the UK's outlook. Perhaps it was pretty good last year or two years ago. uh now we need to do some soularching um and as an ex-regulator give us your view of our main regulator financial conduct authority in the UK's approach towards regulating this uh this industry and also touch on some of the other stakeholders like the bank of England they've been in the press recently for stable coins and limits on transactions and also what do you see coming down the road in terms of implementation absolutely um and picking up on some of the points Lord Holmes made there you know I completely agree that we need to we need to get on with it. But I I observe that we are feeling the impact of a long period of stasis from the regulators and I think we are in a lucky position and I I do think we're lucky to have an independent regulator in this country that comes with a lot of benefits but it does mean that the policym process is slow because it needs to be done transparently in the public domain and we had a a period of 2021 2022 2023 when nothing was really happening. no progress was being made. There were lots of statements then last year about right, we're going to do this, we're going to go for it, but that's really only when the FCA started and now we're racing to catch up on some of that lost ground that we've made and some of the timelines that the FCA has to work to simply can't be compressed by nature of them being an independent regulator. Um so you know just just to set that scene a little bit you know the FCA published a roadmap at the end of last year which is an a very ambitious plan on how it's going to regulate all aspects of the of the crypto asset ecosystem. Already this year it has published a discussion paper on market abuse and admissions and disclosures. It's published a discussion paper on regulating different crypto asset activities. It's done a consultation paper on stable coins and custody on credential requirements. There is a consultation paper out now on it, how it applies the different parts of the current FCA handbook to crypto assets. So, a lot is happening at the moment and that's and that's very good. Um, we do, as Lord Holmes pointed out, you know, the the final statuto instrument does need to be in place before the FCA can ultimately finalize its rules. That could happen quite quickly. I've I've seen this process, you know, once once final rules are laid, this can happen in a, you know, a week. it can also take a very long time. So I I think your estimate for for next year is probably fair. Um but even if we have the final policy statutes and everything in place at the beginning of next year, that does not mean it will apply instantly. There is going to have to be a transition period and an implementation process to to make sure that the huge cadra of firms that are coming in to the FCA's regulatory perimeter for the first time actually know how to do that. And we already have a an extra layer if you like of firms that are registered um under the MLRs with the FCA. So that's sort of a a halfway house. um it is not FISMA authorization at all but it is a meaningful bar to to meet in the UK and that process is is fairly arduous for firms I would argue it's a slow process um and that's that can take firms a year so now we need to think about well what does actually implementation look like with the FCA when these firms come to the the authorizations gateway so my point there is there there is a lot of reason to be optimistic we're seeing the we're seeing the momentum happening and it is right that we hold government and senior executives feet to the fire on keeping that momentum going. But it's also crucial that we engage in the detail as well and don't let the former be at the cost of the latter because we will we can have a great you know a regime that's in place. It's here quickly brilliant and then we start to look to the details and it is unworkable and there is a real risk right now that that might happen. Again, I've said it earlier, the FCA is an independent regulator, so it is going to go in the direction that it sees fit. Obviously, it the CEO of the FCA is appointed by the chancellor. So, the it is accountable to government. It is accountable to the Treasury Select Committee, but ultimately what those details look like and how much of a competitive UK market we have is being consulted on right now. So that's my sort of ask of participants today to you know keep keep lobbying at that top level but please please please get into the nitty-gritty as well. Well that's a very clear uh explanation of the current environment we're in but if I may ask a followup question Laura and please anyone else come in on this. I remember first speaking to the government some four years ago about regulated stable coins. four years later, we still haven't got a licensing regime in place where multiple jurisdictions across the globe do. And if you're building a stable coin um offering, which many folks are, I'm sure, at this conference, there's there's no roadmap for your business. You can't build out your product. And so, guess what happens? You look elsewhere. Why is it taking the FCO so long? So, I was going to key off of something Laura said where she's like, "Oh, nothing happened for the last three years." And being in the US for the last three years where things were uh uh very aggressive from a regulatory perspective, I think many of us and to key on some of the things Lord Holmes said too, many of us were very hopeful that the UK would be um out in front uh from the regulatory perspective because there's a robust financial markets. Everyone speaks English, right? So you have this uh common ground, the time zone is good. um you have you know good it's very easy to set up companies here and so lots of companies from the US were coming over we were meeting with Treasury we were meeting with the FCA we were meeting with members of parliament um and it seemed like there was a lot of momentum so from I think maybe we were all uh hopeful uh when we were in the US that the UK would be our panacea I guess but um I do think they've lost momentum and lost ground and to your point on the BOE we were all going in and having those meetings all the time they had their sandboxes that they were doing for their own um stable coin or CBDC kind of thing and it's all just fizzled out. You barely I mean from the US perspective we don't pay attention as much anymore as we used to. That's what I'm hearing. And you mentioned the CEO of the FCA. Does it start at the top? Does it the culture filter down through the regulator that this our industry isn't perceived to be important that where we've seen a 180 in the US where there actually is a lot of positive positive policy support with the task force and a cryptos are been appointed. Yeah, I I'll answer that and then I want to go to the stable coin point in particular as well. I do think the culture starts at the top in these regulators and you have to remember okay COVID and I I was there during COVID. was uh a a hugely challenging time for the FC and I I don't deate debate that but you had a change in CEO, you had a change in the entire executive leadership and I do believe in 2019 2020, you know, you had Andrew Bailey, we had Chris Wallard, you had people that I think understood potentially the the role of innovation um and what a crypto asset industry could look like in the future. Um, and you had a workforce actually where there was I was surrounded by experts. Like I loved my teams because I was the dumbest person there and that was fantastic. Like that's what you want. And post uh postcoid for many many complicated reasons that a lot of them made the press. People started to become unhappy with with the culture and the climate and a lot of very good people left. And it is hard to bring back those people where you need a, you know, you need a base level of understanding on this market, but you also need to understand how policy works and how that those pieces fit together internally. And I think that's what the FCA has really been struggling with to to get over that hump. Um, to revert to your Why is it taking so long? Stable coins. Yes, stable coins. So, what why it's taken so long is a is an excellent question. I don't think anyone knows the answer to that. Um, but we kind of we are where we are. The FCA has done a consultation paper now. So, put out a position. We are in this strange position with the Bank of England where they did a discussion paper two years ago in which they said they would be contemplating caps for businesses and individuals on on stable coin holdings. Um, they didn't list out what those caps would specifically be, but they referenced the CBDC paper. So, it was sort of you could draw conclusions over the summer. Then then there's been a lot of um discussion. I think the bank's been having, you know, lots of private meetings. So clearly they're they're talking about issuing a consultation paper soon. Those limits have come back up. I think the discussion now is um 10,000 for individual uh 20,000 for individuals, 10 million for businesses. I do think those caps are going to be really problematic. I do think they are going to seriously cail a UK stable coin market. And also there are so many practical challenges around supervision and enforcement and you know how are these a wallet based limit like this that this could be a whole panel in of itself and also what the bank is proposing in terms of their broader stable coin regime does not align with what the FCA is proposing and we cannot have a cliff edge between those two regimes. Um and this is uh and you're talking about systemic the systemic stable coins. Yes. But but you will ultimately have a a firms will transition from one to the other. Now obviously there are some stable coin issuance that could be systemic from an inception and that's another challenge because we still don't know what that looks like in the context of stable coins. No, it's actually Treasury that defines when something meets a test for being systemic, but the bank could certainly come out with guidance on what it would consider when it's when it's making that um that determination as well. Um but you know, this is why I said at the earlier that we need to engage in the in the form and the substance. You know, what the FCA has put out on on stable coins in many ways is going to be seriously challenging. I think the you know the T+1 redemption periods when you have assets that cannot be liquidated within one business day is going to be a problem. Um I think the the confusion between redemption and conversion is really problematic. You know we have a the conversion is the dayto-day BAU and it's important for secondary markets to provide liquidity. Redemption is is a backs stop when things go wrong and those things seem to be being confused. There's lots of points within there that I think we we need to move this forward if we want to create a UK market because ultimately I believe that is what the regulators want. They want people to be in the UK issuing stable coins in the UK within the regulatory perimeter so the FCA can have full supervisory and enforcement grasp around that if they are sat overseas they can still issue stable coins for use in the UK. They can issue a GBP denominated stable coin but the FCA doesn't have the same grip grip over it. Um, sorry, before I get off my soap box, there there was one little um bit of good news though in in the latest consultation paper from the FCA, they have uh shown that they want to treat UK uh UK issuers differently to overseas issuers in terms of financial promotion. So, some of the risk warnings that currently are there, they would say don't need to be applied because a UK issuer will be regulated by the FCA. Whereas if you're an overseas issuer that would still say that stay there. So they are thinking how to do this. This UK competitiveness thing I think is starting to come through but maybe not aggressive enough and maybe a little bit late. Sorry. All I was going to say, sorry Lord Holmes if um but what I was going to say is also these caps and the uh the very ownorous requirements I think also don't harmonize with Mika uh which is the markets and crypto asset regulation which is the EU regulatory perimeter which also encompasses stable coins and has its own whole set of very ownorous requirements um which make issuing EU stable coins very difficult and then it also doesn't it's not going to and doesn't harmonize with genius in the US And so as Lord Holmes was saying, this is a global market. Yes, you are going to have different requirements in different jurisdictions, but ultimately if you have these more difficult requirements in certain jurisdictions, you're going to cut them off. And it's going to cause problems because the whole point of stable coins is to make them interoperable, permissionless, deeply liquid. And so if that's not at the forefront, and it's not always uh at the forefront for regulators, then you are going to sort of break things here and there. I would say the other thing is and you sort of referenced this um uh obliquely but the FCA mostly um in enforcement is about elicit finance I find and I think that they haven't addressed the elicit finance question on the stable coin side sufficiently for their own comfort and so I think a lot of that runs through how both the FCA and other regulators throughout the world think about these issues. Chris, do you have any views on on this sort of equivalency where we're not singing from the same song sheet and the also the bank of England's caps on systemic? I mean, we can't define systemic. As my understanding, the only systemic payment system in the UK today are Visa, Mastercard and faster payment. So, I just can't see a world where stable coins will ever feel that. But it's interesting when one thinks about systemic as well, isn't it? Because for so long all of this crypto and digital ass space has been said, you've got to watch those people in the digital asset space in case it becomes systemic. Well, uh, touch really. uh you you might say with recent events, but to build on a few of the points that have been made to the stable coins point, I think we really do need to get on with it because I remember taking the paving legislation through for that as part of FSMA 2023. As Laura mentioned, the Bank of England did its DP papers on that in the autumn of 2023. We're now in the autumn 2025. So, crack on with that. Building on that with the regulation point, I think now is as good a time as any to just reiterate that point to put to bed the nonsense false dichotomy which recurs with tedious inevitability that you can either have innovation or regulation. You can't have both. An argument almost being made that we'd really really succeed in this space if we were just all allowed to crack on with it with minimal if any regulation. Well, every element of human economic history tells us that rights size regulation is good for investment and innovators. Nobody really, if they were even partially awake, would invest their hard-earned funds into a market that had no rules, no regulations, no certainty, no stability. That would just be odd. I'll put it no stronger than that. Odd. So rightize regulation is where we should be aiming. And that brings us on to the points that have rightly been raised. We need to really focus on words around interoperability and international outlook and perspective. How we enable frictionless experiences. How we bring people into this. And to the leadership point, even more than the leaders of our regulators, it's for the leaders of our nations to come together around these themes. As you know, there's a AI and cryptos are well embedded in the right side of the White House. Where are we in the UK with that? And last year at a time when two billion of us went to the polls around the world, where were all of these new technologies? Where was digital assets threaded into that narrative? Imagine climate crisis, energy emergency, cost of living, migration, mobility, any of the issues that are facing nations right around the world. you could underpin a really positive narrative constructed on these human-led technologies with these potential new financial models and instruments which can speak to all of those things. But where was the leadership? Where was the commentary? Where was any of this in any of those manifestos? I'd suggest sadly lacking. And yet, as we all know, when you do in a rationally optimistic way lead on these issues, people will engage, the discourse, the debate will be sparked, and positive things generally come about when we work together and do stuff as societies and communities. Absolutely. Thank you. Okay, let's um come to your question, Rebecca. On this panel last year, you had a fellow American. you're surrounded by Brits this year, but everyone's talking about the US for obvious reasons. As a legal and reg expert that's worked for several DeFi protocols in your um career and now operating the US, can you discuss where the state of play is with regards to DeFi perhaps regulating frontends for example and also give the audience a sense of the environment back home in the US as it seems to have somewhat changed. Yes. Uh so I'll start with the latter question first. I think the regulatory and policy environment in the US has changed dramatically in the last 10 months. Um, and it's a lot of the work we should have all been doing for the last four to six years. Um, a lot of meetings with regulators, a lot of education. We were all doing that, but obviously nobody was walking into the SEC since about 2018 for obvious reasons. Um there was some collaboration with the CFTC but it was not as big and there was a lot of work on the hill sort of with members of Congress and their staffers on education. There were numerous attempts um even the last let's say three years, two years to write market structure legislation, but now we're really pushing forward at a very fast pace. It is obviously a priority for this admin this president's um administration um for a number of reasons. Obviously with the passage of the Genius Act, which is the US bill that regulates stable coin issuance, um that's a huge step forward and a big recognition of how important stable coins are going to be from an economic perspective, especially from a US dollar uh predominance perspective. So, and in the US, uh the stable coin craze is huge. Uh may not be spoken about as much as deaths and other big things, but it's very big. Um, and I think the SEC is doing a lot of really good work to try to put out guidance um, so that people can move forward in a productive way because I think everybody in the US and elsewhere just wants to get on with the business of doing business. And um, you know, I've said many times uh, even in the last let's say year that the best thing would be if we stop having regulatory panels two to three years from now. Um because employers can just be back office people like we're supposed to be. Um just like you know looking at agreements and you know writing terms of use and things like that. Um so that's the sort of regulatory landscape. The other piece of it before we get to the DeFi question is that the US is engaged in partnerships with the UK. The SEC just came out and said they are um building this corridor sandbox with the UK and people have said oh that's so novel. So interesting to see the US and UK collaborate and it is and it is very special because it's positive and I think will move things forward. Obviously where the US stands on regulation is influential in many ways from a global perspective but the SEC was doing that work privately the last four years without talking about it. Um Chair Gensler was sending people over to the FCA to teach them about how to regulate and enforce against crypto. um and uh a member of the fintech uh division at the SEC was very working very closely with a member of the SC FCA um on a lot of the IASCO guidance. So the US has had a lot of influence whether it's been public or not over the last for you probably know better than I do exactly how long but um on the crypto side of things I will say um we are pushing forward on market structure legislation in the United States even though the government is shut down hill staffers are working including on weekends to see what we can do about market structure legislation but I think both the US UK and probably elsewhere the biggest question is and will remain mean to be what do we do about DeFi or decentralized finance although everyone in this room probably knows what DeFi is. Um the education piece on this is critical. We've been all working on it for a very long time and I think the question of what to do with DeFi is so hard because it is almost like you're explaining robots to people or like what the future looks like. And it is very hard for financial regulators to believe that things that look so similar to what they know from centralized legislation can actually happen without any human intervention. And we've seen from lots of international regul regulatory papers from uh the financial action task force to um others is that people want to find someone to hold accountable for DeFi. And a lot of that uh amounts to oh we're going to regulate frontends right like websites should be doing KYC but in the DeFi world doing KYC on a website is going to have no real impact I think um maybe you can associate people with their wallets. You can probably do that through exchanges. Um you obviously can't regulate protocols. I will say there's um a good piece in the legislation or the draft legislation. Maybe it's in the draft FCA consultation. I was just looking at it last night 9Z3 where it says we're not going to regulate communications protocols. Um and so I don't know what that exactly is meant to touch but that is actually I think an important point when we think about where DeFi regulation is going to happen. Uh in the US they are very much talking about regulating frontends um and have been for a long time and it is also happening in the UK as well. Um, so I don't know if that's going to hold up market structure legislation in the US, but I will say it has every single time. And every single time somebody thinks, "Oh, I have the solutions no one no one has thought of." And every time it comes out, people in DeFi are like, "Nope, that doesn't work either." So there are other really good ways to think about building out security in DeFi, whether it's through cyber security or when you have, you know, regulated players plugging in and sort of be like if you were going to have Coinbase be the front end or a pathway into unis swap. I think there's a lot you can do there. Um when centralized intermediaries plug into all sorts of service providers, they have disclosure obligations to their regulators and stuff. So there's a lot to do, but um I still think that there is this disbelief from financial regulators that this is extremely different. The one thing I'd say to Keon, how Lord Holmes kicked off our panel, is what happened in DeFi over this um uh market crash, for lack of a better word, was very different than what happened on the centralized exchanges, right? you had a huge DPEG and pricing or huge AR pricing between Binance and Coinbase and Robin Hood and something like Ave just liquidated as it should in a very expected way. And having worked at a number of years ago, I've seen a number of these market cycles and a always works as it should with no human intervention, nobody pressing any buttons, um, and it being all code. So, I think we have a long way to go on DeFi, but um and I don't think we'll see I think it's uh unlikely that market structure will pass in the US this this year, but I think there's a chance that it will pass next year. That's fascinating. I got a bunch of things to follow up on and and and I'll just give my two pennies worth and let the other panelists come in. So I remember the FCA ran its crypto spread back in 2022 and on one of those discussion panels for that full day that we did um in North London was how do you regulate DeFi? Couldn't even define what it was. So if we don't know how to come up with a description then we can't regulate a thing and we we can't even regulate stable coins in the UK. So I see no world where we can regulate decentralized entities. You look at Bitcoin there's no CEO there's no nexus to pin a regulatory hook on. That's a traditional way we regulate. So we need to come up with perhaps a bottom up approach. That's what my friends in the European Parliament talk about. And so just to pick up on one issue that I noted in a Treasury consultation recently just over the last few months, they mentioned we should look to regulate liquid staking providers. I mean, how are we going to do that? And why is that even in there? I I don't know. And I probably will talk to the FCA about it later uh today. But um uh you know I still think we first of all people in crypto should take a little responsibility. We are terrible with the language that we use. Wallets aren't actually wallets. Staking we use staking to mean 60 different things. Um and so you know from our vantage point we should be using language that is easier to use and more precise. Um, I say that as a lawyer, but um, I do think that that's caused a lot of the confusion. Um, and so I think staking is understood and um, I'm interested to hear what Laura says on the SI that's out there on staking now is that it comes through these centralized providers. So, it's very hard to think about liquid staking, which operates permissionlessly not having the same protections. But if you think about where things um sit from a liquid staking perspective, people are like well what if I don't know people are like what if something happens how what if they uh the liquid staking token loses its peg from the um underlying asset and it's like well something really catastrophic and mostly just from a cyber security perspective would have to happen there and people still don't like this idea that DeFi may need to have cyber security rags more than they need financial services rags. Yeah, I agree with that. perhaps some sort of we got this door and operational resilience legislation across the EU. But to your point about the market crash and a lot of liquidations happening, we witnessed it in 22 when Teral Luna went down and then FTX, DeFi stood up because it's not it just functions. It doesn't matter what the price is. The smart contract executes if this then that happens and it there you go. You want to come in on any of these? Yes, absolutely. And you know, Rebecca's point about taxonomy is is really good. And actually, that's been a problem on DeFi, I think, because true DeFi, the FCA has said it doesn't it isn't going to regulate true DeFi because it can't. But the problem is it's a spectrum and a lot of what professes to be DeFi is not really DeFi. Um, I I do think the FDA is going to come out with some guidance or or start to move more in that direction to have a little bit of a little bit more clarity on how it's thinking about these things because, as Rebecca said, when you have centralized entities plugging into a decentralized network, there are lots of on andoff ramps to for the FCA to get its hands around. But I think industry and the regulator needs to to talk more on what that's going to look like. Um the other your other point on staking as well, you know, I think I think the FCA is is focusing a lot more on staking now and most of the conversations I've had with them have been really positive. Um I still do think there are are some challenges on some of the understanding and I think the the requirement in one of the consultation papers earlier this year that a staking provider should be entirely liable for any failures on third party providers uh is an is an example of where I think maybe that understanding is is starting to differ because that unlimited liability doesn't exist anywhere else in the financial system. You know there is a there is a you know a duty of responsibility certainly for the staking provider to you know operation and resilience outsourcing requirements all of these things but there cannot be unlimited liability irrespective of the role that the staking provider actually has and the control it has over those other providers. So some good news some maybe not so much. Yeah the one thing I wanted to pick up on is uh what you referred to at the beginning which is this true DeFi versus not true DeFi. So um you know everybody for a long time was like let's define decentralization and I think across the board industry regulators everyone was like okay you can't do that like everyone has different definitions nobody could agree what factors should we use but in the US we pivoted to this concept of control uh which I actually think makes a lot of sense because it's one uh I mean it's mostly how we regulate financial institutions today is do you have control o not just custody but control over user assets um or can affect value for others. And it's interesting because the UK is pivoting to this concept of control as well to try to think about where something is DeFi and doesn't necessarily fall under the same regulatory scheme and where not. But you can see that people are still struggling with what factors, you know, make up control. Um US we did it through the 2019 Fininset guidance in the crypto context, but you don't really have a correlary yet today. No. And and it and it's really interesting because we don't have centralized finance isn't something we talk about and the way the UK regulates is it regulates activity based. So once you meet the definition of whatever that activity is, you're in the perimeter. Yet with DeFi, it's the it's beholden to the firms to to rationalize why they're not in the perimeter on a definition we don't yet have, which is completely the wrong way around. I think it's because the activities are so different. Like holding an admin key, right, over a protocol that you're never going to use unless there's an emergency is so different than taking in funds and holding them in an escrow account and something that we all really understand or what about hosting a server that may do engine m you know that has an engine that does matching and then sends it back to the protocol. Those are technical activities that somehow filter into this new financial system and I don't think financial regulators as much as people are used to fintech and things like that like um you know even you know cross payments providers PayPal, Venmo whatever um people can understand that because there's just like oh you're you own the backend technology and I think the difference in DeFi is even if you have a front end that is known nobody owns the backend technology so it's very hard to understand public infrastructure for good. Yeah. I think what what you say there though I'm completely agreeing with that it what some of those concepts do I think they can be helpful to us in gently taking the regulators by the hand to take them on this journey so things around actors activities actions applications all that stuff completely agreeing they you know it's it's very different but that to get them over that often mountain of gosh it's just so different we are completely stopped in our tracks if you will to slightly over exaggerate the point. I think the concepts where they are comfortable and understanding activities then taking them on a journey through activities to get them into this space will be helpful in putting a bit more pace and I guess regulator comfort for them to to bring them more more on this journey. Yeah. Okay. Last uh 30 seconds. Rebecca touched on it. I want everybody's view of the messaging coming out firstly from the uh state visit of uh the US president we watched with some shock and amazement a few weeks ago unprecedented second state visit to messaging from the SEC and also messaging from the outgoing um head of the New York uh NYDFS department of financial services recently for UK and US equivalency for crypto regulation. Very interesting message Chris hyperbole or is this a real thing? I think we have a real opportunity to connect with the United States to connect across the EU and to broader jurisdictions if we fundamentally get into concepts around interoperability both of the regulatory approach and indeed the technologies and if we think human connection leading to technology leading to economic connection we have what we need to make a success of this it's in our human hands if we human lead and we get the public debate and the public discourse in place, we can have a ration, optimistic, really positive future. But that none of that is an inevitability. And I've even resisted the temptation because we're almost out of time to give you my Donald Trump impression again. Another another time, another time. Come see us afterwards. Rebecca Bullish, UK US corridor. I mean, I I couldn't have said it better. I think the UK has a huge opportunity. I think the US is very open. They're clearly open to collaboration, and I think everybody should be taking advantage of that right now. Yeah, I feel like the lights are coming down, but yes, reciprocity. If the UK is serious, building bridges with jurisdictions like the US, with Europe, and making that seamless is is an absolute no-brainer. Great. Well, a wonderful discussion. All that remains me to thank the wonderful panel. Thank you. Thank you.
Shaping Up: MiCA 2.0, US Policy, and Crypto's Regulatory Picture | DAS London 2025 | Day 1 | Main
Summary
Transcript
Good morning everyone. Thank you ever so much for joining this early panel on the first day of the conference. It's my pleasure to have a conversation for the next half an hour or so with a panel of global experts on regulation and the policy environment. We have a wellrespected pit, a UK regulatory expert and a highly respected and experienced global crypto lawyer on this panel with us today. I'll ask them to introduce themselves shortly, but let me quickly set the scene for you. It's been over three years here in the UK where Crypto UK was instrumental in getting a positive policy position for the UK to be a crypto innovation hub. We'll discuss how that's been going and where we are today. We'll also talk about a number of other jurisdictions, especially the US and we'll also look to Europe. I have no doubt that you'll find this early discussion on the first day of the conference a good starting point for ongoing discussions this week on how I believe as I'm sure my fellow pan panelists do we have turned the corner from being a cottage industry into the start of mass adoption for our technology. Okay, so let's start with introductions if I go to the end of the line and ask Lord Holmes to introduce yourself please. Thank you very much indeed Ian and what a great pleasure to be with you this morning. I'm Chris Holmes Lord Holmes. I've been in the House of Lords for 12 years almost to the day and my areas are leading on all things new technology, AI, blockchain, DT, cyber, and all things digital assets and tokenization with the golden threads of EDI and ESG running through all of that. Thank you. Uh I'm Rebecca Reic. I'm the chief legal officer at Judo Labs. Um, Judabs builds infrastructure for the Salana ecosystem, but I've also been a lawyer working in the crypto space for many, many years at this point. And because I had been uh working on the technology and uh have a traditional financial services background on the legal side, have been doing a lot of policy work including with Ian in the UK, in the EU, in Asia, and of course in the US. Uh, and we don't really have anything settled, so there's a lot to talk about today. Thank you. Hi. Um, I'm Lauren Navaratnam. I am the UK policy lead for the Crypto Council for Innovation. So, we're a global members association. Um, I've been with CCI for about two years. Um, in terms of my background, I spent seven years at the FCA. Um, where I looked after their the innovate team, so their their fintech team, which was originally where crypto policy started out in the FCA. Great to be here. Thank you everyone. What a wonderful panel. We don't have any questions. So, if you do have some questions, please do doors stop us afterwards or we'll be around for most of the day. Okay, let's kick off with with Lord Holmes here. Sort of zooming out from the top level in the UK. You know, as a peer and longtime supporter of many novel technologies such as blockchain and AI, can you give the audience a sense of the UK's current position with regards to the crypto industry and also share some of your personal views on how we could perhaps be better? Certainly. And thank you again. First and foremost, I really should health and safety we should focus on first really. So, following Saturday, how's everybody's blood pressure? Yeah, what a day. But we're all here and the future is now. There's a lot of talk about what's happening in the UK and there's no question that if you want one sentence to lay out what we need to do in the UK, we need to get on with it from a regulatory, from a policy, from a leadership position. Because we have an extraordinary opportunity in this space. Why? First and foremost, because of the great good fortune of English common law. adaptable, dynamic, stable, well understood, used in jurisdictions right around the world. Secondly, we're right in the heart of the city of London here this morning. What an extraordinary financial services ecosystem. Third, our great higher education and technology ecosystem in London, but right across the country. So we have all of the ingredients, but it would be fair to say that we haven't applied the pace that we need to when it comes to showing the leadership and the regulatory landscape that we need to optimize in this space. And critically, we know how to do this. We know how to do right-sized regulation. We know how to do regulation legislation that's good for innovation, good for investment, good for consumer, good for creative, good for citizen. I took the electronic trade documents act through the lords and early this year took the property digital assets bill through the lords which is still in the commons this autumn. If you want to know more the detail of those bills do come and see me after this. Honestly they're more interesting than their titles might suggest. But being in a position to have extraordinary success doesn't mean that it will just naturally come to us. We need to act. We need to do stuff. I was with the economic secretary to the Treasury last week. And some positive signs coming out of government. They're suggesting that a policy framework for crypto may be in place by the end of this year. I think it probably will be a little bit uh beyond that. ETN's being allowed in innovative ISAs, a good move, but probably not far enough in that space. Work on digit, the uh sovereign digital guilt procurement out for that last week. Positive, but still needs more pace. And we need to always view this in the global context. This isn't a UK play. We're in a global market. We couldn't be in a more global 247 realtime environment. Saturday showed us that clearly. But ultimately in short a stunning opportunity for the UK in this space but that opportunity needs to be taken by legislators by regulators and crucially then connecting and communicating to everybody right across the country and beyond because what I really want and what interests me the most about all of these technologies is we need them to be mass participation technologies, mass participation, financial services, mass participation opportunities because that's how we can really enable people right across society. But if we look at some of the sharpest ends around financial exclusion and digital exclusion, if we get these opportunities right, not least with digital assets, we could really start to address some of those most significant issues that have dogged our society and ruined lives for decades. Well, thank you uh Lord Holmes and and from the community a huge thank you for all the efforts that you highlighted there especially for the digital property rights bill which is a first of its kind propriety piece of legislation that helps with clarity for our industry and also you mentioned the new economic secret to the treasury. I keep trying to get in her diary and I invited to this event but she hasn't picked up on the offer yet. So, so maybe if you bump into a in the parliament of state, could you mention that we'd like a meeting? But um okay, that's the policy and the government have been supportive issuing primary legislation. Now, let's move to the hard task of actually writing the regulatory um guard rails. Laura, so let's look at the UK's outlook. Perhaps it was pretty good last year or two years ago. uh now we need to do some soularching um and as an ex-regulator give us your view of our main regulator financial conduct authority in the UK's approach towards regulating this uh this industry and also touch on some of the other stakeholders like the bank of England they've been in the press recently for stable coins and limits on transactions and also what do you see coming down the road in terms of implementation absolutely um and picking up on some of the points Lord Holmes made there you know I completely agree that we need to we need to get on with it. But I I observe that we are feeling the impact of a long period of stasis from the regulators and I think we are in a lucky position and I I do think we're lucky to have an independent regulator in this country that comes with a lot of benefits but it does mean that the policym process is slow because it needs to be done transparently in the public domain and we had a a period of 2021 2022 2023 when nothing was really happening. no progress was being made. There were lots of statements then last year about right, we're going to do this, we're going to go for it, but that's really only when the FCA started and now we're racing to catch up on some of that lost ground that we've made and some of the timelines that the FCA has to work to simply can't be compressed by nature of them being an independent regulator. Um so you know just just to set that scene a little bit you know the FCA published a roadmap at the end of last year which is an a very ambitious plan on how it's going to regulate all aspects of the of the crypto asset ecosystem. Already this year it has published a discussion paper on market abuse and admissions and disclosures. It's published a discussion paper on regulating different crypto asset activities. It's done a consultation paper on stable coins and custody on credential requirements. There is a consultation paper out now on it, how it applies the different parts of the current FCA handbook to crypto assets. So, a lot is happening at the moment and that's and that's very good. Um, we do, as Lord Holmes pointed out, you know, the the final statuto instrument does need to be in place before the FCA can ultimately finalize its rules. That could happen quite quickly. I've I've seen this process, you know, once once final rules are laid, this can happen in a, you know, a week. it can also take a very long time. So I I think your estimate for for next year is probably fair. Um but even if we have the final policy statutes and everything in place at the beginning of next year, that does not mean it will apply instantly. There is going to have to be a transition period and an implementation process to to make sure that the huge cadra of firms that are coming in to the FCA's regulatory perimeter for the first time actually know how to do that. And we already have a an extra layer if you like of firms that are registered um under the MLRs with the FCA. So that's sort of a a halfway house. um it is not FISMA authorization at all but it is a meaningful bar to to meet in the UK and that process is is fairly arduous for firms I would argue it's a slow process um and that's that can take firms a year so now we need to think about well what does actually implementation look like with the FCA when these firms come to the the authorizations gateway so my point there is there there is a lot of reason to be optimistic we're seeing the we're seeing the momentum happening and it is right that we hold government and senior executives feet to the fire on keeping that momentum going. But it's also crucial that we engage in the detail as well and don't let the former be at the cost of the latter because we will we can have a great you know a regime that's in place. It's here quickly brilliant and then we start to look to the details and it is unworkable and there is a real risk right now that that might happen. Again, I've said it earlier, the FCA is an independent regulator, so it is going to go in the direction that it sees fit. Obviously, it the CEO of the FCA is appointed by the chancellor. So, the it is accountable to government. It is accountable to the Treasury Select Committee, but ultimately what those details look like and how much of a competitive UK market we have is being consulted on right now. So that's my sort of ask of participants today to you know keep keep lobbying at that top level but please please please get into the nitty-gritty as well. Well that's a very clear uh explanation of the current environment we're in but if I may ask a followup question Laura and please anyone else come in on this. I remember first speaking to the government some four years ago about regulated stable coins. four years later, we still haven't got a licensing regime in place where multiple jurisdictions across the globe do. And if you're building a stable coin um offering, which many folks are, I'm sure, at this conference, there's there's no roadmap for your business. You can't build out your product. And so, guess what happens? You look elsewhere. Why is it taking the FCO so long? So, I was going to key off of something Laura said where she's like, "Oh, nothing happened for the last three years." And being in the US for the last three years where things were uh uh very aggressive from a regulatory perspective, I think many of us and to key on some of the things Lord Holmes said too, many of us were very hopeful that the UK would be um out in front uh from the regulatory perspective because there's a robust financial markets. Everyone speaks English, right? So you have this uh common ground, the time zone is good. um you have you know good it's very easy to set up companies here and so lots of companies from the US were coming over we were meeting with Treasury we were meeting with the FCA we were meeting with members of parliament um and it seemed like there was a lot of momentum so from I think maybe we were all uh hopeful uh when we were in the US that the UK would be our panacea I guess but um I do think they've lost momentum and lost ground and to your point on the BOE we were all going in and having those meetings all the time they had their sandboxes that they were doing for their own um stable coin or CBDC kind of thing and it's all just fizzled out. You barely I mean from the US perspective we don't pay attention as much anymore as we used to. That's what I'm hearing. And you mentioned the CEO of the FCA. Does it start at the top? Does it the culture filter down through the regulator that this our industry isn't perceived to be important that where we've seen a 180 in the US where there actually is a lot of positive positive policy support with the task force and a cryptos are been appointed. Yeah, I I'll answer that and then I want to go to the stable coin point in particular as well. I do think the culture starts at the top in these regulators and you have to remember okay COVID and I I was there during COVID. was uh a a hugely challenging time for the FC and I I don't deate debate that but you had a change in CEO, you had a change in the entire executive leadership and I do believe in 2019 2020, you know, you had Andrew Bailey, we had Chris Wallard, you had people that I think understood potentially the the role of innovation um and what a crypto asset industry could look like in the future. Um, and you had a workforce actually where there was I was surrounded by experts. Like I loved my teams because I was the dumbest person there and that was fantastic. Like that's what you want. And post uh postcoid for many many complicated reasons that a lot of them made the press. People started to become unhappy with with the culture and the climate and a lot of very good people left. And it is hard to bring back those people where you need a, you know, you need a base level of understanding on this market, but you also need to understand how policy works and how that those pieces fit together internally. And I think that's what the FCA has really been struggling with to to get over that hump. Um, to revert to your Why is it taking so long? Stable coins. Yes, stable coins. So, what why it's taken so long is a is an excellent question. I don't think anyone knows the answer to that. Um, but we kind of we are where we are. The FCA has done a consultation paper now. So, put out a position. We are in this strange position with the Bank of England where they did a discussion paper two years ago in which they said they would be contemplating caps for businesses and individuals on on stable coin holdings. Um, they didn't list out what those caps would specifically be, but they referenced the CBDC paper. So, it was sort of you could draw conclusions over the summer. Then then there's been a lot of um discussion. I think the bank's been having, you know, lots of private meetings. So clearly they're they're talking about issuing a consultation paper soon. Those limits have come back up. I think the discussion now is um 10,000 for individual uh 20,000 for individuals, 10 million for businesses. I do think those caps are going to be really problematic. I do think they are going to seriously cail a UK stable coin market. And also there are so many practical challenges around supervision and enforcement and you know how are these a wallet based limit like this that this could be a whole panel in of itself and also what the bank is proposing in terms of their broader stable coin regime does not align with what the FCA is proposing and we cannot have a cliff edge between those two regimes. Um and this is uh and you're talking about systemic the systemic stable coins. Yes. But but you will ultimately have a a firms will transition from one to the other. Now obviously there are some stable coin issuance that could be systemic from an inception and that's another challenge because we still don't know what that looks like in the context of stable coins. No, it's actually Treasury that defines when something meets a test for being systemic, but the bank could certainly come out with guidance on what it would consider when it's when it's making that um that determination as well. Um but you know, this is why I said at the earlier that we need to engage in the in the form and the substance. You know, what the FCA has put out on on stable coins in many ways is going to be seriously challenging. I think the you know the T+1 redemption periods when you have assets that cannot be liquidated within one business day is going to be a problem. Um I think the the confusion between redemption and conversion is really problematic. You know we have a the conversion is the dayto-day BAU and it's important for secondary markets to provide liquidity. Redemption is is a backs stop when things go wrong and those things seem to be being confused. There's lots of points within there that I think we we need to move this forward if we want to create a UK market because ultimately I believe that is what the regulators want. They want people to be in the UK issuing stable coins in the UK within the regulatory perimeter so the FCA can have full supervisory and enforcement grasp around that if they are sat overseas they can still issue stable coins for use in the UK. They can issue a GBP denominated stable coin but the FCA doesn't have the same grip grip over it. Um, sorry, before I get off my soap box, there there was one little um bit of good news though in in the latest consultation paper from the FCA, they have uh shown that they want to treat UK uh UK issuers differently to overseas issuers in terms of financial promotion. So, some of the risk warnings that currently are there, they would say don't need to be applied because a UK issuer will be regulated by the FCA. Whereas if you're an overseas issuer that would still say that stay there. So they are thinking how to do this. This UK competitiveness thing I think is starting to come through but maybe not aggressive enough and maybe a little bit late. Sorry. All I was going to say, sorry Lord Holmes if um but what I was going to say is also these caps and the uh the very ownorous requirements I think also don't harmonize with Mika uh which is the markets and crypto asset regulation which is the EU regulatory perimeter which also encompasses stable coins and has its own whole set of very ownorous requirements um which make issuing EU stable coins very difficult and then it also doesn't it's not going to and doesn't harmonize with genius in the US And so as Lord Holmes was saying, this is a global market. Yes, you are going to have different requirements in different jurisdictions, but ultimately if you have these more difficult requirements in certain jurisdictions, you're going to cut them off. And it's going to cause problems because the whole point of stable coins is to make them interoperable, permissionless, deeply liquid. And so if that's not at the forefront, and it's not always uh at the forefront for regulators, then you are going to sort of break things here and there. I would say the other thing is and you sort of referenced this um uh obliquely but the FCA mostly um in enforcement is about elicit finance I find and I think that they haven't addressed the elicit finance question on the stable coin side sufficiently for their own comfort and so I think a lot of that runs through how both the FCA and other regulators throughout the world think about these issues. Chris, do you have any views on on this sort of equivalency where we're not singing from the same song sheet and the also the bank of England's caps on systemic? I mean, we can't define systemic. As my understanding, the only systemic payment system in the UK today are Visa, Mastercard and faster payment. So, I just can't see a world where stable coins will ever feel that. But it's interesting when one thinks about systemic as well, isn't it? Because for so long all of this crypto and digital ass space has been said, you've got to watch those people in the digital asset space in case it becomes systemic. Well, uh, touch really. uh you you might say with recent events, but to build on a few of the points that have been made to the stable coins point, I think we really do need to get on with it because I remember taking the paving legislation through for that as part of FSMA 2023. As Laura mentioned, the Bank of England did its DP papers on that in the autumn of 2023. We're now in the autumn 2025. So, crack on with that. Building on that with the regulation point, I think now is as good a time as any to just reiterate that point to put to bed the nonsense false dichotomy which recurs with tedious inevitability that you can either have innovation or regulation. You can't have both. An argument almost being made that we'd really really succeed in this space if we were just all allowed to crack on with it with minimal if any regulation. Well, every element of human economic history tells us that rights size regulation is good for investment and innovators. Nobody really, if they were even partially awake, would invest their hard-earned funds into a market that had no rules, no regulations, no certainty, no stability. That would just be odd. I'll put it no stronger than that. Odd. So rightize regulation is where we should be aiming. And that brings us on to the points that have rightly been raised. We need to really focus on words around interoperability and international outlook and perspective. How we enable frictionless experiences. How we bring people into this. And to the leadership point, even more than the leaders of our regulators, it's for the leaders of our nations to come together around these themes. As you know, there's a AI and cryptos are well embedded in the right side of the White House. Where are we in the UK with that? And last year at a time when two billion of us went to the polls around the world, where were all of these new technologies? Where was digital assets threaded into that narrative? Imagine climate crisis, energy emergency, cost of living, migration, mobility, any of the issues that are facing nations right around the world. you could underpin a really positive narrative constructed on these human-led technologies with these potential new financial models and instruments which can speak to all of those things. But where was the leadership? Where was the commentary? Where was any of this in any of those manifestos? I'd suggest sadly lacking. And yet, as we all know, when you do in a rationally optimistic way lead on these issues, people will engage, the discourse, the debate will be sparked, and positive things generally come about when we work together and do stuff as societies and communities. Absolutely. Thank you. Okay, let's um come to your question, Rebecca. On this panel last year, you had a fellow American. you're surrounded by Brits this year, but everyone's talking about the US for obvious reasons. As a legal and reg expert that's worked for several DeFi protocols in your um career and now operating the US, can you discuss where the state of play is with regards to DeFi perhaps regulating frontends for example and also give the audience a sense of the environment back home in the US as it seems to have somewhat changed. Yes. Uh so I'll start with the latter question first. I think the regulatory and policy environment in the US has changed dramatically in the last 10 months. Um, and it's a lot of the work we should have all been doing for the last four to six years. Um, a lot of meetings with regulators, a lot of education. We were all doing that, but obviously nobody was walking into the SEC since about 2018 for obvious reasons. Um there was some collaboration with the CFTC but it was not as big and there was a lot of work on the hill sort of with members of Congress and their staffers on education. There were numerous attempts um even the last let's say three years, two years to write market structure legislation, but now we're really pushing forward at a very fast pace. It is obviously a priority for this admin this president's um administration um for a number of reasons. Obviously with the passage of the Genius Act, which is the US bill that regulates stable coin issuance, um that's a huge step forward and a big recognition of how important stable coins are going to be from an economic perspective, especially from a US dollar uh predominance perspective. So, and in the US, uh the stable coin craze is huge. Uh may not be spoken about as much as deaths and other big things, but it's very big. Um, and I think the SEC is doing a lot of really good work to try to put out guidance um, so that people can move forward in a productive way because I think everybody in the US and elsewhere just wants to get on with the business of doing business. And um, you know, I've said many times uh, even in the last let's say year that the best thing would be if we stop having regulatory panels two to three years from now. Um because employers can just be back office people like we're supposed to be. Um just like you know looking at agreements and you know writing terms of use and things like that. Um so that's the sort of regulatory landscape. The other piece of it before we get to the DeFi question is that the US is engaged in partnerships with the UK. The SEC just came out and said they are um building this corridor sandbox with the UK and people have said oh that's so novel. So interesting to see the US and UK collaborate and it is and it is very special because it's positive and I think will move things forward. Obviously where the US stands on regulation is influential in many ways from a global perspective but the SEC was doing that work privately the last four years without talking about it. Um Chair Gensler was sending people over to the FCA to teach them about how to regulate and enforce against crypto. um and uh a member of the fintech uh division at the SEC was very working very closely with a member of the SC FCA um on a lot of the IASCO guidance. So the US has had a lot of influence whether it's been public or not over the last for you probably know better than I do exactly how long but um on the crypto side of things I will say um we are pushing forward on market structure legislation in the United States even though the government is shut down hill staffers are working including on weekends to see what we can do about market structure legislation but I think both the US UK and probably elsewhere the biggest question is and will remain mean to be what do we do about DeFi or decentralized finance although everyone in this room probably knows what DeFi is. Um the education piece on this is critical. We've been all working on it for a very long time and I think the question of what to do with DeFi is so hard because it is almost like you're explaining robots to people or like what the future looks like. And it is very hard for financial regulators to believe that things that look so similar to what they know from centralized legislation can actually happen without any human intervention. And we've seen from lots of international regul regulatory papers from uh the financial action task force to um others is that people want to find someone to hold accountable for DeFi. And a lot of that uh amounts to oh we're going to regulate frontends right like websites should be doing KYC but in the DeFi world doing KYC on a website is going to have no real impact I think um maybe you can associate people with their wallets. You can probably do that through exchanges. Um you obviously can't regulate protocols. I will say there's um a good piece in the legislation or the draft legislation. Maybe it's in the draft FCA consultation. I was just looking at it last night 9Z3 where it says we're not going to regulate communications protocols. Um and so I don't know what that exactly is meant to touch but that is actually I think an important point when we think about where DeFi regulation is going to happen. Uh in the US they are very much talking about regulating frontends um and have been for a long time and it is also happening in the UK as well. Um, so I don't know if that's going to hold up market structure legislation in the US, but I will say it has every single time. And every single time somebody thinks, "Oh, I have the solutions no one no one has thought of." And every time it comes out, people in DeFi are like, "Nope, that doesn't work either." So there are other really good ways to think about building out security in DeFi, whether it's through cyber security or when you have, you know, regulated players plugging in and sort of be like if you were going to have Coinbase be the front end or a pathway into unis swap. I think there's a lot you can do there. Um when centralized intermediaries plug into all sorts of service providers, they have disclosure obligations to their regulators and stuff. So there's a lot to do, but um I still think that there is this disbelief from financial regulators that this is extremely different. The one thing I'd say to Keon, how Lord Holmes kicked off our panel, is what happened in DeFi over this um uh market crash, for lack of a better word, was very different than what happened on the centralized exchanges, right? you had a huge DPEG and pricing or huge AR pricing between Binance and Coinbase and Robin Hood and something like Ave just liquidated as it should in a very expected way. And having worked at a number of years ago, I've seen a number of these market cycles and a always works as it should with no human intervention, nobody pressing any buttons, um, and it being all code. So, I think we have a long way to go on DeFi, but um and I don't think we'll see I think it's uh unlikely that market structure will pass in the US this this year, but I think there's a chance that it will pass next year. That's fascinating. I got a bunch of things to follow up on and and and I'll just give my two pennies worth and let the other panelists come in. So I remember the FCA ran its crypto spread back in 2022 and on one of those discussion panels for that full day that we did um in North London was how do you regulate DeFi? Couldn't even define what it was. So if we don't know how to come up with a description then we can't regulate a thing and we we can't even regulate stable coins in the UK. So I see no world where we can regulate decentralized entities. You look at Bitcoin there's no CEO there's no nexus to pin a regulatory hook on. That's a traditional way we regulate. So we need to come up with perhaps a bottom up approach. That's what my friends in the European Parliament talk about. And so just to pick up on one issue that I noted in a Treasury consultation recently just over the last few months, they mentioned we should look to regulate liquid staking providers. I mean, how are we going to do that? And why is that even in there? I I don't know. And I probably will talk to the FCA about it later uh today. But um uh you know I still think we first of all people in crypto should take a little responsibility. We are terrible with the language that we use. Wallets aren't actually wallets. Staking we use staking to mean 60 different things. Um and so you know from our vantage point we should be using language that is easier to use and more precise. Um, I say that as a lawyer, but um, I do think that that's caused a lot of the confusion. Um, and so I think staking is understood and um, I'm interested to hear what Laura says on the SI that's out there on staking now is that it comes through these centralized providers. So, it's very hard to think about liquid staking, which operates permissionlessly not having the same protections. But if you think about where things um sit from a liquid staking perspective, people are like well what if I don't know people are like what if something happens how what if they uh the liquid staking token loses its peg from the um underlying asset and it's like well something really catastrophic and mostly just from a cyber security perspective would have to happen there and people still don't like this idea that DeFi may need to have cyber security rags more than they need financial services rags. Yeah, I agree with that. perhaps some sort of we got this door and operational resilience legislation across the EU. But to your point about the market crash and a lot of liquidations happening, we witnessed it in 22 when Teral Luna went down and then FTX, DeFi stood up because it's not it just functions. It doesn't matter what the price is. The smart contract executes if this then that happens and it there you go. You want to come in on any of these? Yes, absolutely. And you know, Rebecca's point about taxonomy is is really good. And actually, that's been a problem on DeFi, I think, because true DeFi, the FCA has said it doesn't it isn't going to regulate true DeFi because it can't. But the problem is it's a spectrum and a lot of what professes to be DeFi is not really DeFi. Um, I I do think the FDA is going to come out with some guidance or or start to move more in that direction to have a little bit of a little bit more clarity on how it's thinking about these things because, as Rebecca said, when you have centralized entities plugging into a decentralized network, there are lots of on andoff ramps to for the FCA to get its hands around. But I think industry and the regulator needs to to talk more on what that's going to look like. Um the other your other point on staking as well, you know, I think I think the FCA is is focusing a lot more on staking now and most of the conversations I've had with them have been really positive. Um I still do think there are are some challenges on some of the understanding and I think the the requirement in one of the consultation papers earlier this year that a staking provider should be entirely liable for any failures on third party providers uh is an is an example of where I think maybe that understanding is is starting to differ because that unlimited liability doesn't exist anywhere else in the financial system. You know there is a there is a you know a duty of responsibility certainly for the staking provider to you know operation and resilience outsourcing requirements all of these things but there cannot be unlimited liability irrespective of the role that the staking provider actually has and the control it has over those other providers. So some good news some maybe not so much. Yeah the one thing I wanted to pick up on is uh what you referred to at the beginning which is this true DeFi versus not true DeFi. So um you know everybody for a long time was like let's define decentralization and I think across the board industry regulators everyone was like okay you can't do that like everyone has different definitions nobody could agree what factors should we use but in the US we pivoted to this concept of control uh which I actually think makes a lot of sense because it's one uh I mean it's mostly how we regulate financial institutions today is do you have control o not just custody but control over user assets um or can affect value for others. And it's interesting because the UK is pivoting to this concept of control as well to try to think about where something is DeFi and doesn't necessarily fall under the same regulatory scheme and where not. But you can see that people are still struggling with what factors, you know, make up control. Um US we did it through the 2019 Fininset guidance in the crypto context, but you don't really have a correlary yet today. No. And and it and it's really interesting because we don't have centralized finance isn't something we talk about and the way the UK regulates is it regulates activity based. So once you meet the definition of whatever that activity is, you're in the perimeter. Yet with DeFi, it's the it's beholden to the firms to to rationalize why they're not in the perimeter on a definition we don't yet have, which is completely the wrong way around. I think it's because the activities are so different. Like holding an admin key, right, over a protocol that you're never going to use unless there's an emergency is so different than taking in funds and holding them in an escrow account and something that we all really understand or what about hosting a server that may do engine m you know that has an engine that does matching and then sends it back to the protocol. Those are technical activities that somehow filter into this new financial system and I don't think financial regulators as much as people are used to fintech and things like that like um you know even you know cross payments providers PayPal, Venmo whatever um people can understand that because there's just like oh you're you own the backend technology and I think the difference in DeFi is even if you have a front end that is known nobody owns the backend technology so it's very hard to understand public infrastructure for good. Yeah. I think what what you say there though I'm completely agreeing with that it what some of those concepts do I think they can be helpful to us in gently taking the regulators by the hand to take them on this journey so things around actors activities actions applications all that stuff completely agreeing they you know it's it's very different but that to get them over that often mountain of gosh it's just so different we are completely stopped in our tracks if you will to slightly over exaggerate the point. I think the concepts where they are comfortable and understanding activities then taking them on a journey through activities to get them into this space will be helpful in putting a bit more pace and I guess regulator comfort for them to to bring them more more on this journey. Yeah. Okay. Last uh 30 seconds. Rebecca touched on it. I want everybody's view of the messaging coming out firstly from the uh state visit of uh the US president we watched with some shock and amazement a few weeks ago unprecedented second state visit to messaging from the SEC and also messaging from the outgoing um head of the New York uh NYDFS department of financial services recently for UK and US equivalency for crypto regulation. Very interesting message Chris hyperbole or is this a real thing? I think we have a real opportunity to connect with the United States to connect across the EU and to broader jurisdictions if we fundamentally get into concepts around interoperability both of the regulatory approach and indeed the technologies and if we think human connection leading to technology leading to economic connection we have what we need to make a success of this it's in our human hands if we human lead and we get the public debate and the public discourse in place, we can have a ration, optimistic, really positive future. But that none of that is an inevitability. And I've even resisted the temptation because we're almost out of time to give you my Donald Trump impression again. Another another time, another time. Come see us afterwards. Rebecca Bullish, UK US corridor. I mean, I I couldn't have said it better. I think the UK has a huge opportunity. I think the US is very open. They're clearly open to collaboration, and I think everybody should be taking advantage of that right now. Yeah, I feel like the lights are coming down, but yes, reciprocity. If the UK is serious, building bridges with jurisdictions like the US, with Europe, and making that seamless is is an absolute no-brainer. Great. Well, a wonderful discussion. All that remains me to thank the wonderful panel. Thank you. Thank you.