The early ideal of crypto was about building a new kind of financial system—decentralized and democratic—where governments and corporations couldn’t make the rules. The growing influence of tech elites may succeed in rolling back these democratic ideals—especially in Europe. This article analyzes how this influence manifests, the specific threats it poses to European democracy, and the EU's response through initiatives like MiCAR and the digital euro.
The Rising Tide of Tech Elite Influence
What was once considered a democratized financial landscape in the crypto space is quickly becoming influenced by these tech elites. This impact comes in many ways, from direct lobbying and investment to creating the story and culture that surrounds crypto.
Perhaps the most visible example of this is the proposed “Erebor” bank. That’s intended to fill some of the gap created by the blow-up of Silicon Valley Bank. Support for these types of speculative projects from tech elites is telling of their increasing influence in shaping the crypto industry’s long-term infrastructure. Similarly, the transformation of figures like Michael Saylor, once a crypto skeptic, into a vocal proponent demonstrates how tech elites can sway public opinion and market sentiment.
Perhaps that’s why founders such as Facebook’s Mark Zuckerberg and Twitter’s Elon Musk have all delved into the martial arts. Their involvement underscores the ways their personal interests and conceptions of masculinity trouble, inform, and continue to regenerate the crypto culture. This raises questions about the inclusivity and diversity of the space and whether it truly reflects the democratic ideals it initially espoused.
Threats to European Democracy
As it stands, a handful of tech elites possess tremendous, undemocratic power and influence. Such a concentration represents numerous dangers to European democracy in the global crypto space. Their power may warp regulation, suppress innovation, and ultimately threaten the stability of the entire financial system.
Key players Jamie Dimon, CEO of JPMorgan Chase and Warren Buffett, CEO of Berkshire Hathaway, are key players in swaying regulatory conversations. What they write, say, and do can influence the course of these crucial discussions. Dimon's dismissive view of crypto as "worth nothing" and Buffett's criticism of it as a "terrible store of value" can shape public perception and influence policy decisions, potentially hindering the growth and adoption of crypto in Europe.
Moreover, the backing of crypto platforms by tech elites, such as Berkshire Hathaway's investment in Nu Holdings, which launched the crypto platform 'Nubank Cripto,' demonstrates their ability to control access to and shape the development of crypto services. This increase of power can make it harder for competitors to enter the market. Additionally, it risks reducing the options open to European citizens.
The continuing dominance of US-based payment providers and stablecoins further jeopardises European monetary sovereignty. It’s an astonishing fact that the vast majority of high-value financial transactions in Europe depend on non-European infrastructures. Such dependence would jeopardize the EU’s influence over the EU’s monetary system and hamper its capacity to conduct a distinct autonomous monetary policy.
The EU's Response: MiCAR and the Digital Euro
Indeed, the EU is stepping up tremendously to address these challenges. It seeks to defend its democratic principles by countering the increasing power of tech oligarchs in the crypto world. The recently adopted Markets in Crypto-Assets (MiCA) regulation and the proposed digital euro are the most high-profile efforts in this agenda.
MiCA: A Unified Regulatory Framework
MiCA’s ambition is to create a single, holistic regulatory framework covering all crypto-assets in the EU. Its key components include:
- Unified EU Licensing Structure: MiCA introduces a single authorization system applicable across all 27 EU member states, streamlining the regulatory process for crypto-asset service providers (CASPs).
- Authorization Requirements: CASPs must obtain authorization to operate within the EU, ensuring they meet specific standards related to governance, capital requirements, custody, and administration. This helps protect consumers and maintain the integrity of the market.
- Ongoing Compliance: CASPs must continuously adhere to MiCA requirements after the July 2026 deadline, ensuring sustained compliance and accountability.
- Rules for Crypto-Asset Services: MiCA outlines comprehensive rules for crypto-asset services, promoting transparency, accountability, and consumer protection.
- Transparency and Accountability: Stablecoin issuers are required to provide frequent transparency reports demonstrating that their reserves are fully backed by liquid assets. Custodians must undergo regular audits to ensure the safety and security of customer funds.
The Digital Euro: A Step Towards Monetary Autonomy
The European Central Bank (ECB) intends to issue and oversee the digital euro. In this context, the digital euro will be first and foremost a CBDC. It is designed to:
- Increase strategic autonomy in the European monetary system and reduce reliance on non-European payment providers.
- Preserve monetary stability under all circumstances and maintain democratic values by ensuring the EU retains control over its currency.
- Mitigate the risks associated with crypto centralization, such as "bank runs" and the reinforcement of US dominance in the financial system.
- Promote European integration, reduce dependence on external monetary systems, and increase financial stability.
Actionable Insights for EU Policymakers and Citizens
To further safeguard democratic values in the crypto space, EU policymakers and citizens should consider the following actions:
- Establish clear regulations: Develop and implement comprehensive regulations that address the risks associated with crypto, such as money laundering, terrorist financing, and market manipulation.
- Enhance consumer protection: Implement measures to protect consumers from scams, phishing attacks, and other forms of exploitation. This includes education and awareness campaigns, as well as strict penalties for wrongdoers.
- Promote transparency and accountability: Encourage transparency in crypto transactions and ensure that companies and individuals are held accountable for their actions.
- Mitigate risks of crypto in ransomware attacks: Develop strategies to prevent the use of crypto in ransomware attacks. This includes improving cybersecurity, enhancing international cooperation, and implementing strict penalties for those involved.
- Address concerns of regulatory capture: Ensure that regulatory bodies are independent and free from conflicts of interest, and that they prioritize the public interest over the interests of the crypto industry.
By taking these steps, the EU can strive to ensure that the crypto space aligns with its democratic values and serves the interests of its citizens. The other big challenge is the ascent of tech elites. Despite these challenges, the EU can respond to this changing landscape by being proactive and remaining focused on democratic values, allowing it to stay in the driver’s seat over its fiscal future.
