Here’s an inconvenient truth for Europe – the US will dominate the digital asset arena
by Jean-Marie Mognetti, CEO of CoinShares
I recently spent a significant amount of time in the United States. Landing back in Europe over the July 4 weekend gave me time to reflect.
While in the US I met numerous business partners and industry insiders, and I was given a glimpse into the future of the digital asset industry. What I witnessed has led me to an unexpected conclusion: the United States, despite the perception driven by the recent regulatory hurdles from the US Securities and Exchange Commission (SEC), is poised to become the global leader in the digital asset industry.
My conclusion may seem counterintuitive given some legacy players’ declarations and the SEC’s reputation for its strict stance on cryptocurrencies. However, the signs of an American takeover in the crypto space are clear and imminent.
The US is preparing to regulate cryptocurrencies as existing assets, aligning them with traditional securities and commodities. This approach, juxtaposed with the strategies of other jurisdictions that are creating entirely new regulatory frameworks for digital assets, highlights the United States’ willingness to integrate traditional and digital assets, old and new finance.
The decision made by the US goes against the rhetoric and melodrama that plays out in the Twitter-sphere, about the interplay between the regulator and Wall Street on the crypto takeover.
The advantage of the United States extends beyond regulations into the synergies between Silicon Valley innovators and traditional financial institutions.
These communities, instead of operating in separate domains, are engaged in a vibrant exchange of ideas and collaboration, fostering an environment of innovation and growth in the digital asset industry. Take for instance the BlackRock and Coinbase collaboration, which brings crypto access to BlackRock’s Aladdin platform through Coinbase Prime.
This example is just one of many emerging partnerships, as evidenced by the public initiatives in the Cumberland/DRW incubator.
Contrast this with the situation in Europe. The European Union, in a bid to spur innovation, has chosen to regulate digital assets as a unique asset class. By doing so, the EU has bypassed the question of financing, staffing and budgeting for such an exercise.
This approach has created a chasm between traditional finance and the emergent crypto ecosystem, with both communities operating in distinct silos. This disconnect has bred a mutual belief that neither traditional finance nor the crypto world are “good enough”, which now means that the potential for integrated growth and innovation has been left unrealised.
Europe’s approach becomes even more problematic when compared to the financial might of US institutions. These financial behemoths (such as BlackRock and Fidelity, who each announced recently the filing of a spot Bitcoin ETF) are well-positioned to provide widespread crypto exposure.
Their significant capital and extensive client base give them the unique advantage of facilitating mass adoption of digital assets.
By creating more accessible routes for the public to invest in cryptocurrencies, these institutions will likely fuel unprecedented growth in the sector.
In line with this viewpoint, CoinShares made a strategic shift in 2016, transitioning from active to passive asset management strategy. The goal was to create a regulated and trustworthy offering through crypto Exchange-Traded Products (ETPs). This move opened the door for European investors to diversify their portfolios with a slice of the crypto market, furthering the integration of traditional and digital finance.
Hong Kong presents an instructive model for Europe to emulate. A pioneer in bridging innovation within traditional finance, Hong Kong has successfully facilitated connections between new players and established players in the financial landscape.
Evidence of this successful integration is seen in its recent approval of Bitcoin and Ethereum ETFs, and the subsequent offering of these products on the local HSBC’s banking app which has brought digital assets to a wider audience. This example demonstrates the remarkable advancements that can be achieved in the financial sector when a State actively nurtures and promotes a symbiotic relationship between traditional finance and the digital asset industry.
However, it’s not too late for Europe. As we find ourselves on the brink of a financial revolution, I want to encourage hybridisation.
It’s high time that traditional finance players and crypto enthusiasts in Europe step out of their silos and engage in meaningful dialogue.
We need these communities to meet, discuss, and innovate together. UniCredit Asset Management’s arm, Azimut, has demonstrated commendable foresight by forming partnerships with miners and launching easily accessible retail crypto products.
This strategic initiative not only showcases a positive trajectory but also serves as an inspiring model for other traditional finance players in Europe to embrace.
This is not just about catching up with the United States; it’s about securing Europe’s position and sovereignty in the future of finance. Without this hybridisation in Europe, the United States is set to dominate the digital asset industry for sure. The US’ strategic regulation, the symbiotic relationship between traditional finance and tech innovators, and the financial muscle of established institutions create the perfect conditions for an American takeover.
As the digital asset industry continues to evolve, let’s ensure that Europe is not just a spectator but an active participant in shaping its future.