What a way to begin the morning. Like the minister said, choose France. Bet on France. In a word to bring a word from the crypto space here, bullish. We're bullish on France. We're bullish on Signal Week. We're bullish on Paris. Now, not much can happen without regulation and without clarity, which is why our next talk is going to dive into MiCA and the consequences of it. You'll hear from Peter Kirsten and Haider from OKX.
Hello everyone. Good morning. Thank you first off and it's great to be here in Paris. At OKX, you know, we operate in a number of regulated markets and Europe stands out as having delivered the most comprehensive crypto regime at scale with MiCA. The focus is now the framework and how it performs in practice and how it evolves. So today is about bringing the real world implementation experience with the next phase of policy design. And Peter, I'm so happy that you join us. I'm going to give you a minute to introduce yourself to the audience.
Well, thank you Haider for inviting me here on stage at the beginning of Paris Blockchain Week. I've been working in crypto policy or digital assets policy for eight years now and it's about eight years ago that we started with the design of MiCA. It was indeed the first framework. It's the most comprehensive framework and it's been the inspiration for regulatory frameworks around the world where what was designed in Brussels is being emulated across the world. We have many jurisdictions now putting frameworks in place. But as our own framework is starting off and the aim of this framework was to bring clarity into the market to bring certainty and to onshore crypto activity onto European markets. We saw that people were interested in crypto but they were trading offshore. We said if you want to trade crypto do so in the regulatory sunlight in Europe if you're European. That's what we wanted to do. Create legal certainty. Now the framework is in place. We have over both on the issuance and the service provider side over 180 licensed entities operating. There will be more but it's time now to start stock is MiCA delivering as it was designed. And what's next because this framework was designed eight years ago. The markets have moved on. The markets have matured. They're not yet fully mature. There will be other developments, but we really have to say and people have to recognize that MiCA is not the end of the story. It's the beginning of the story. And that's why I'm so happy to be here talking about this with you.
Lovely. And for folks who saw the trailer and you found it exciting, I really encourage you to go on YouTube or any streaming channels and look up the film. It's called The Mild Mild West by OKX. And the premise behind that film is we feel that our industry deserves to be called the mild mild west not the wild wild west. And I think we'll focus this session on how collaboratively we can all create that environment for ourselves. So I'll start with the first question Peter, MiCA in practice. Actually before we even go into MiCA in practice I want to look at this world map over there on our left side. And if you reflect back 5 years ago, I would argue that all the markets highlighted in light colors did not exist back then. And those represent the markets that have clear regulatory framework today. Can you imagine what this map would look like in 5 years? Because our view is, Peter, that in five years, maybe seven years, you'll see very few markets, if any, that will have self-regulated frameworks or absence of one. So that's the world we're heading towards. So when you look at MiCA and MiCA in practice, we're now in the early phase of MiCA implementation. From the commission's perspective, what are the most important and early insights that you can share? Let's start the conversation there.
Well, first insight is that MiCA is working. We see firms being licensed across the EU. It's not that they all go to one member states. We see licenses being given out across the EU usually a sign for success for the commission when we do regulation policies. Do we get many complaints? We do not. We do not get many complaints which is a sign that it is working very well. Does that mean that there are no questions? Are no debates? Is there things that cannot be improved? No. But there is no major problem. So people who say we want a MiCA 2 that is because they want more of this not because they think MiCA is broken and therefore needs to be fixed urgently and that's a good sign that people say yes this was the right approach to take to bring order into this market to turn the wild west into a mild mild west because it was when we started off crypto was a wild west environment very exciting you could become very rich or lose it all easily and It's now much much more mature. But we need to go further because this it's not only going to be crypto markets. We're going to see digital assets markets. Any asset can be tokenized. Any asset can be put on a blockchain and traded. And that is why we need to constantly review. But the first insights are that MiCA is delivering. And of course the press likes to talk about drama here or debate there and so on. But I do not think that this is material in any way.
So 30 NCAs, I mean gosh I can't even imagine how the consensus works. But if people have perception that Europe can be slow, well with MiCA, you being the architect of MiCA, you've proven that wrong because you look at United States, there's legislation finally coming out, one with Genius Act, you know, the anticipated clarity act, but it feels like Europe's figured this out faster than the Americans. Can you tell me a little bit about that?
Well, we started off thinking about it in 2018. At the time, there was very little momentum for pro-crypto regulation. People said that's a waste of time, don't do it. But we said no, there's a lot of opportunity in here and we have to promote and enable this for our own economy, for our own investors. And then when the stable coin debate got launched with Libra, that really created a bit of political panic that was a catalyst for us to present MiCA. We were in a way lucky then is that the crypto ecosystem itself was not that much focused on policy and politics. So we had very little public affairs and lobbying and the financial institutions traditional financial institutions were completely uninterested in this. They said this is a sideshow. No one cares about this stuff. So we got to do MiCA in relative quiet waters. If I am I'm currently looking at the debate in the US and what I see is that it's pitting the crypto industry against the banks and they're canceling each other out. That's why the debate is not progressing and it's pointless for them to cancel each other out. They should work together and bring this further. So it was difficult to develop MiCA because many member states and members of the European Parliament had no real idea what this market was about. They knew nothing about it or if they knew something or they thought they knew something about it, they thought that oh crypto is a money laundering conspiracy and that's it. So we had to do a fair amount of education as to why there was value into this. But there was no strong polarized positioning which allowed us to take it through relatively quickly. Now it's all relative in life. It still took us three years of preparation and negotiations. And many of my days at the time looked like Groundhog Day. Every day was the same. More I said, 'Oh, more of this. How are we when are we finally finally finally going to agree this?' But we got there and then we did the implementation. So, it's now a number of years later and it works well.
Well, you're absolutely right. I think you guys got it done when this wasn't a politicized topic and I worry that in the US the politics might kill any prospects of us seeing common sense legislation. But anyway, I'm going to move on to the second section around supervisory convergence and level playing field. And I have a few questions here, but I'll start with one of the themes we're hearing across the industry including us of course is the importance of consistent implementation. How is the commission ESMA or the NCA's thinking about this?
Well, consistency is extremely important because we have a single market and we want people to be treated the same and the rules to be the same across the EU. That's the importance for so we started by having MiCA as a regulation meaning it's directly applicable. It does not need to be transposed international law. It's not a directive. It's a regulation. So that already means that the rules are going to be the same everywhere. But what you can't harmonize is supervisory attitude. Some supervisors are more pro-innovation than others. You can try to converge them and they work together within ESMA and the European Bank Authority to converge. But attitude is something which is more psychological. If you want to have a single supervisory attitude, you have to move it to a single authority. And that's why the European Commission proposes to move supervision of crypto asset service providers to ESMA here in Paris because then you'll have everyone will be facing a supervisor with the same attitude because there's only one supervisor. Whether that attitude is going to be pro-crypto or more I would say skeptical remains to be seen. Although I've got good hopes also with the proposals which we made for the change to the governance and to the mandate of ESMA that that attitude would be I wouldn't say pro crypto, it would be pro-innovation and that's important because it's not about crypto, it's about innovation. That's what we're after.
Yes. And we've spoken about this a number of times now over the last 24 hours. Tell me when you think about innovation, is tokenization the most attractive topic when you think about financial industry innovation?
Absolutely. I have been at the European Commission 30 years. I've worked many areas but most of my life I've worked on issues related to market infrastructure and it's highly technical, very complex. Many financial institutions make an awful lot of money out of exploiting inefficiencies in the system, friction points, and tokenization and blockchain gives us really an opportunity to do away with these friction points. That's going to mean that some companies are going to lose their source of revenue because these friction points that they're currently exploiting, they will no longer be there. But I very firmly believe because of my interest in blockchain in technology that and this has been endorsed by my boss the commissioner that distributed ledger technology blockchains and tokenization will become the new operating system of financial markets. I have no doubt that I will live to see the future where financial markets are tokenized and operate on distributed ledger technology. I will live that day. I may even be not yet retired when it happens.
Well, I hope it happens sooner than later because it is very exciting. Can you imagine people in Europe who do have access to brokerage accounts and can access American equities, European equities, so on and so forth. But can you imagine what happens to the rest of the world? The 8 billion people or say close to a billion investors out there in the world when they can access European and American equities markets and they're not time zone prohibited, they're not cost prohibited, they can do fractional trading, they can do 24/7 trading. That's incredible because you look at the US equities market it's about $70 trillion give depending on the trading day and 18% of those are foreign-based investors. Well, what happens to the US equities market and its value when you can attract more foreign-based investors into it? Does it go to 100 trillion? What happens to the European equities market? I'm curious how you think about the value creation when tokenization actually becomes a reality.
Well, I think we can only start beginning to imagine what may happen. We can't really predict the new dynamics that will emerge. We may have some idea. I think it'll be an enormous opportunity. Financial markets depend on liquidity. Everyone wants liquidity and liquidity begets liquidity. If you do not have deep and liquid markets, your markets do not function. By growing your investor base, you increase liquidity. That's also what the European savings and investment union is about or the capital markets union. It really is by integrating markets so that there's more liquidity in them and that they can serve the needs of industry and the economy for financing better. Now, it's extremely hard to integrate markets just through law. You can adopt laws and says you thou shalt be integrated but that doesn't mean anything. It's extremely hard to integrate markets based on legacy infrastructure and technology because these are all separate entities that are scotch taped together and that spend time reconciling accounts with each other. To integrate markets, you have to move them onto shared ledgers, onto distributed ledgers. And that's how the integration will work. And that will bring massive amount of investors and liquidity onto the market than on chain.
