Meanwhile, Europe is quickly becoming the new epicenter of all things crypto and the US is being left behind. This has been largely influenced by the rollout of the Markets in Crypto-Assets (MiCA) framework. This elaborate regulatory framework provides transparency and consistency throughout the European Union. At home, the US is plagued with regulatory uncertainty. At the same time, data from exchanges and platforms such as Paybis indicate that most crypto companies and investors are relocating to Europe. Kwame Nkosi is a Siebel Energy Fellow who monitors the fast-developing blockchain landscape. He digs into the reasons fueling this transatlantic trend and what the US can learn from Europe’s more proactive stance.
Europe's Regulatory Magnet: The MiCA Effect
The Markets in Crypto-Assets (MiCA) framework adoption was a historical turning point for the European crypto industry. In the United States, the same regulatory environment is splintered and at times paradoxical. MiCA offers full harmonization via a single EU-wide licensing regime that all 27 member states must follow. This means that once a crypto firm is authorized in one EU country, it can operate freely across the entire bloc. This streamlined approach significantly reduces compliance costs and operational complexities, making Europe an attractive destination for crypto businesses seeking stability and growth potential.
The influence of MiCA is by no means speculative. Just look at the numbers. Paybis, an EU-based crypto exchange platform, reports increasing peak trading volumes from EU customers. This profound uptick follows the introduction of MiCA. In fact, trading volumes surged 70% q-o-q in Q1 2025, immediately after the MiCA regulation came into full force. This unprecedented level of activity signals a new wave of confidence in the European crypto market. Regulatory clarity and increased investor protection is driving greater participation. Unfortunately, for crypto activity in the US, it has occurred amidst a notably vicious regulatory turn. Regulatory uncertainty and enforcement actions have smothered its development.
France has emerged as one of the most colorful hubs of the European crypto scene. The country has experienced an astounding 175% increase in crypto adoption. This boom is a direct result of its early adoption of crypto-friendly regulations set out by the 2019 PACTE law. This forward-thinking approach has lured hundreds of crypto startups. It has captured the attention of big-time, established fintech companies, further confirming France’s status as an innovation darling. Global fintech hubs such as Station F increase France’s attractiveness radically. Together, they form a competitive, business-friendly landscape that enables crypto companies not just to survive but to flourish.
US Regulatory Quagmire: A Drag on Innovation
The current US regulatory environment around cryptocurrencies is murky at best, and at worst, represents a regulatory regime that is arbitrary and capricious. Different federal agencies, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), have taken different approaches to regulating digital assets, leading to confusion and uncertainty for businesses. This regulatory confusion has crushed innovation and forced most crypto companies to pursue more hospitable jurisdictions.
One of the other significant hurdles in the US is the lack of a harmonized licensing regime for crypto enterprises. As it stands, companies have to sort through a confusing landscape of state and federal regulations, often adding time and costs to the development process. This unfriendly and fragmented approach creates multiple barriers to entry. As a result, the little guys can’t compete with big, well-connected incumbents. All while the SEC continues to double down on an enforcement-focused approach. This has created a chilling effect and disincentivized investment and growth in the US crypto market.
Europe and US have radically different approaches to regulation. This gap demonstrates just how important concrete and transparent rules are in creating a thriving crypto market. Meanwhile, across the Pond, Europe has adopted a much more proactive and harmonized approach. At the same time, the US has lagged, leaving its crypto industry at a competitive disadvantage. As Kwame Nkosi often emphasizes, "regulatory clarity is not just about compliance; it's about creating an environment where innovation can flourish."
Stablecoins: A Key Battleground
Stablecoins—cryptocurrencies that are pegged to the value of an otherwise stable asset, such as the US dollar—are a fundamental part of the crypto ecosystem. They power trading, they are a store of value and they allow numerous decentralized finance (DeFi) applications to exist. MiCA has established strict rules for stablecoins, requiring full 1:1 reserves, regular audits, and asset segregation. These measures would help shield investors from losses, build greater confidence in the overall stability of the stablecoin market.
The comprehensive measures for stablecoins laid out in MiCA have played a role in restoring investor faith in Europe. MiCA requires that stablecoins be 100 percent backed by highly liquid assets. It exposes them to the same intense oversight in order to avoid the type of collapses and de-pegging events that have roiled the crypto market previously. This newfound stability promises to make Europe a very attractive destination for stablecoin issuers and users on both sides of the Atlantic.
Unfortunately, the regulatory future for stablecoins in the US is still unclear. Though we’ve seen some legislative progress on the state and federal level to provide more clarity, that has been a slow process. Lack of clear regulatory framework leaves stablecoin issuers hanging in the balance. This confusion is hampering the development of the US stablecoin market.
Actionable Insights for US Regulators and Crypto Businesses
Here are some actionable insights for US regulators and crypto businesses:
- Establish a Unified Licensing Regime: The US should create a single, federal licensing regime for crypto businesses, similar to MiCA. This would streamline compliance and reduce the regulatory burden on companies.
- Provide Regulatory Clarity: US regulators should provide clear and consistent guidance on the treatment of different types of crypto assets. This would reduce uncertainty and encourage innovation.
- Embrace Collaboration: US regulators should collaborate with industry stakeholders to develop regulations that are both effective and conducive to innovation. This would ensure that regulations are well-informed and responsive to the needs of the industry.
- Focus on Investor Protection: US regulators should prioritize investor protection by implementing measures to prevent fraud and manipulation in the crypto market. This would increase confidence and attract more investors to the market.
- Promote Innovation: US regulators should create a regulatory sandbox where companies can test new crypto products and services without fear of enforcement action. This would encourage innovation and help the US stay at the forefront of the crypto industry.
The relocation of crypto activity, jobs, and innovation from the US to Europe should serve as a serious wake-up call to American regulators and businesses. The US risks falling behind in the global crypto race if it fails to address the regulatory challenges that are hindering innovation and investment. By learning from Europe's proactive approach and implementing clear, consistent, and innovation-friendly regulations, the US can regain its competitive edge and unlock the full potential of the crypto industry. As our Crypto for the People campaign creator, Kwame Nkosi, explains, the future of crypto is about more than technology. It all depends on building a regulatory sandbox that inspires confidence, encourages creativity, and supports progress.
- Strategic Planning: Companies need to carefully assess the regulatory landscape and develop strategies to navigate the complexities of the US market.
- Compliance Focus: Investing in robust compliance programs is essential to avoid regulatory scrutiny and maintain a good reputation.
- International Expansion: Considering expansion into more crypto-friendly jurisdictions, such as Europe, can provide access to new markets and reduce regulatory risk.
- Advocacy: Engaging with policymakers and advocating for clear and sensible regulations can help shape the future of the US crypto market.
The Road Ahead
The shift in crypto activity from the US to Europe is a wake-up call for American regulators and businesses. The US risks falling behind in the global crypto race if it fails to address the regulatory challenges that are hindering innovation and investment. By learning from Europe's proactive approach and implementing clear, consistent, and innovation-friendly regulations, the US can regain its competitive edge and unlock the full potential of the crypto industry. As Kwame Nkosi would argue, the future of crypto is not just about technology; it's about creating a regulatory environment that fosters trust, innovation, and growth.
