EU data law risks pushing crypto innovation abroad.

Crypto exchange-traded products (ETP) provider 21Shares released the eleventh edition of its “State of Crypto” report on January 28, which details upcoming regulatory changes and their impact on the local crypto scene, among other insights.

According to the report, it is clear that crypto is “alive and thriving”, however, there is an increasing “judicial competition” in the global competition to protect talent and create centers in the industry.

This can be seen in the various regulatory measures initiated in the last year and planned to be realized by 2024. The United States and the European Union were cited as two places that could “threaten their leadership” in the industry.

“… things don't look so clear for the EU. While the Markets in Crypto Assets Regulation (MiCA) could help centralized service providers engage in business more efficiently, the Data Act's clause to ban smart contracts could drive blockchain developers away.

In the year On December 22, 2023, the European Union published the Data Act, a piece of legislation that aims to “facilitate and promote” the exchange and use of data within the European Economic Area. But the law has a clause to terminate intelligent contracts.

The “kill switch” aspect of the law has caused unrest and turmoil in the crypto community ever since.

The lack of transparency around crypto assets in the US is a point that the report highlights the failure to maintain an environment for innovative projects.

The big question going into 2024 is whether regulators in the world's largest market, the US, will finally get the regulatory transparency entrepreneurs and consumers so desperately want.

However, he said the passage of the “Clarity for Payment Stablecoins Act” by US regulators will provide a sense of regulatory clarity to stablecoin issuers like Circle (USDC) and benefit consumers.

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The report highlights that some places, such as Hong Kong and the United Kingdom, are better positioned to develop industrial innovation.

The future of the UK's financial services regulatory scheme for crypto-assets has been cited as positive feedback, with 79% of respondents “mostly supportive” and 40% of crypto-native companies.

“Indeed, the UK will be able to meaningfully attract crypto businesses by 2024. We have seen a preview of this trend with a16z crypto expanding to London and planning to host a Crypto Startup School in 2024.”

The UK Treasury's Economic Secretary also emphasized “the government's desire to make the UK a global hub for crypto-asset technologies”.

21Shares also said Hong Kong has taken a “U-turn” on crypto regulation. In the year In August 2023, the region issued the first licenses in a new system to regulate crypto exchanges.

In the year In December 2023, Hong Kong issued a requirement that stablecoin issuers must meet in order to be licensed to offer assets. Around the same time, it created a way to prepare to accept applications for spot crypto ETFs.

“It remains to be seen whether Hong Kong can attract more leading crypto players and achieve its goal of becoming a crypto hub again.”

Cointelegraph contacted 21Shares for more information on its latest “State of Crypto” report.

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