Billionaire twins Cameron and Tyler Winklevoss achieved cult status after their portrayal in the hit movie The Social Network about the creation of Facebook. Their claim that Mark Zuckerberg copied their idea resulted in a financial settlement, which the brothers used to set about building a new cryptocurrency business, creating a trading platform and digital wallet, principally around Bitcoin. Their company, Gemini, has survived when many similar ventures have floundered in the last couple of years.
In Dublin recently to meet the taioseach, Leo Varadkar, about setting up Gemini’s European headquarters in Ireland, the Winklevoss twins highlighted the attraction of Europe’s approach to regulating cryptocurrency assets and the benefits that would bring. Their measured tones and active welcome of oversight of how the industry operates mark the brothers out from some of their competitors for whom lack of scrutiny was crypto’s unique selling point.
The EU’s markets in crypto assets regulation represents a huge moment for promoters of crypto
U turn
Their optimism about the future is based on what at first glance appears to be the EU’s unlikely embrace of virtual assets earlier this year. That happened despite economists from the European Central Bank last year questioning whether virtual assets had any real utility, and the governor of the Central Bank of Ireland, Gabriel Makhlouf, recently posting on his official blog that some cryptocurrencies are little more than Ponzi schemes touted by social media influencers.
The most significant moment in years for crypto and virtual assets is the passage this year of the European Union’s markets in crypto assets regulations. While these regulations ostensibly give greater protection to buyers of virtual currencies and tokens and ensure compliance with anti-money laundering rules, it is a huge moment for promoters of crypto and the associated trading exchanges and platforms. It is a recognition that crypto assets are widely used and so require some form of regulatory framework.
The US has embarked on a series of lawsuits against some of the biggest names in the crypto business
The EU’s move stands in sharp contrast to the position in the US, where the Securities and Exchange Commission has embarked on a series of lawsuits against some of the biggest names in the business – Coinbase and Binance – and where the posterboy for crypto, Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, is awaiting trial on serious criminal charges following the spectacular collapse of his empire at the end of 2022.
Lure of innovation
If you’d wanted to bet on who would open their arms to crypto innovation first, you would surely have got shorter odds on the entrepreneurial US rather than the stereotypical risk-averse Brussels bureaucrats.
What then lies behind this sudden EU shift? When I speak to law firms representing companies lobbying for regulation and recognition, they suggest that now the genie is out of the bottle and a young, digital-native generation has adopted the technology, the only solution is to proactively engage with it. Hence the EU’s move to introduce regulations.
Europe is keen to avoid missing out on the next big thing
Another theory is that Europe, having seen how Silicon Valley’s dynamism has led to the internet, mobile and digital revolutions of the past three decades, is keen to avoid missing out on the next big thing. The disparity between the size of America’s technology sector and Europe’s is immense, with many more unicorns founded in the US than in the EU. Perhaps this marks an attempt to reshape the traditional narrative that innovation is the preserve of America.
Crypto may not appear to be the horse to back in the race for innovation, given the huge sums now flowing into artificial intelligence start-ups, but it does send a clear message that Europe is keen to attract entrepreneurs with a vision.
