What Do the EU Election Results Mean for Digital Assets?

The results of the 2024 European Union elections are expected to have significant implications for the regulation of digital assets in the region. While centrist parties maintain power, a shift to the right in the European Parliament (EP) could lead to changes in the approach to crypto policy.

One of the most notable pieces of legislation impacting the crypto industry is the Markets in Crypto Assets (MiCA) regulation, which aims to protect investors, provide legal certainty, and promote EU-wide transformation in the digital asset sector. MiCA creates a cohesive framework for crypto asset regulation throughout the EU and streamlines cross-border activities with an 'EU passport' to operate throughout the single market.

Another important regulation is the Transfer of Funds Regulation, which includes the 'travel rule' and requires information about the asset's source and beneficiary to 'travel' with crypto transactions. These provisions, along with MiCA, will begin to apply in mid-2024.

The shift to the right in the EP is expected to impact the implementation and enforcement of these regulations. While crypto policy is not seen as a left or right issue, policy-making may be more challenging in a more fragmented parliament. Some center-right delegations tend to have stronger ties with the US and favor a free market outlook, which could suggest support for enabling policies for innovative technologies. However, other delegations in the same groups may favor a more protectionist stance, which could resist new, global operators.

The centrist parties also lack a unified view on the crypto industry, with individual MEPs holding varying degrees of openness to digital assets. It is unlikely that digital assets policy or broader financial services policy will be a top priority for the incoming EP, which may enable policymakers to focus on effective and consistent implementation and enforcement of the existing rulebook.

The results of the European Parliament elections will also shape the make-up of the incoming European Commission (EC), which acts as a sort of executive in the EU. The EC will play a crucial role in determining what, if any, new policy initiatives still need to be taken in areas such as decentralization, tokenization, and staking.

The digital assets industry has made progress in establishing trust and credibility, but there is still work to be done. The industry's choice of associations in the next five years will be telling of what it stands for. As the industry inches toward regulation and compliance, the new European Parliament and the new College of Commissioners will make a difference on whether this path is bumpy or smooth.