Music.
Hello and welcome, everybody. This is Joe from StartupRate.io,
your startup podcast and YouTube blog from Germany, welcoming today you to another
episode of StartupRate.io, this time with a special guest, with a subject matter expert.
I would like to welcome Ali Reza here from a head of digital assets from Aniton. Welcome.
Hi, Joe. Thank you for having me today. I'm delighted to talk to you today about
digital assets and regulation in Europe. Yes, exactly.
So as always, this is touching a legal topic. This is no legal advice.
You should see it as a starting point for doing your own research, your own digging.
And this doesn't constitute any legal advice at all.
This just gives you a framework how to think about it.
Um alireza would you like to
tell us a little bit about what you
do what you've done in the past before we get into
mika the topic of today's conversation yes sure joe so i'm a lawyer i'm a german-based
lawyer so i'm doing regulatory advice for the past 12 years i'm advising banks
fintechs but other other players who are entering the german market or expanding their footprint
from the German market within the European economic area.
And for the past, I would say, eight years, I have specialized with everything
related to DLT, to the distributed ledger technology, blockchain.
And with that, starting at 2017 with the wave of ICOs, the initial coin offerings
coming over to not just Europe, but I would say to the global market,
I really specialized in helping players to do crypto business.
When I say crypto business, I mean issuing your own token, but also doing crypto
services related to banks like trading, custody and also other things.
And also helping fintechs and non-financial payers to do joint ventures and
to cooperate with regulated players in Europe.
Before we get into the topic, I know at one point ICOs have been very hot.
We also had a few here from the area we interviewed about it.
But then it was it was a crypto winter.
And before or after, did some colleagues ask you, what the hell are you doing there?
Why don't you do just simple M&A, it gets a lot of money, but also is a lot
of work. Yes, definitely.
I mean, you're describing it pretty good. I mean, as I said,
I started looking into it in 2014.
So quite some time. So I have witnessed all the,
halving so far so and everything is related to the
bitcoin halving so either prior or closely after
the halving we witnessed the the crypto winter
and i and i had it many times that colleagues uh were either laughing about
the whole crypto industry or asking me to do some serious business but i'm not
sure how what why it is like this maybe it is my nature my own nature Because
when I started being a lawyer,
I started with some not plain vanilla project.
I started with Islamic banking and Islamic derivatives.
So I was always looking for some, I would say, rather adventurous topics.
And with crypto and blockchain, I have my own fund and I would not like to change it.
And now I think would say I had a long length, a long pre-eff,
we say in Germany, long pre-eff.
I stayed with crypto and now it turns out to be also from an economic perspective,
not such a bad decision to do crypto business and crypto advice.
There's also saying in Germany, was lange dauert, wird am Ende gut.
So what takes long will turn out good.
Fingers crossed for you that this works. But I have to tell you at the beginning,
I was also pretty skeptical of many, many things.
But I do tend to see more and more good, sensible applications of DLT and crypto
technology, maybe just crypto assets,
crypto tokenization of assets,
and really application of this business of those tools in business,
not just to a grip of for the crypto.
So that's something I'm seeing.
And that's what it makes it pretty interesting to me.
But let's dive a little bit into the regulation here.
We're talking about the markets in crypto asset regulation, aka, me car.
And since you've you've been a follower for.
Of the digital asset space for quite some time, can you tell us a little bit
about the story and what it's all about, how, I mean, the European Union does
have a reputation to want to regulate everything.
I'm just talking about the banana regulation here.
But can you elaborate a little bit what's,
the intention behind it, and the process before we get into the regulation itself.
Yes, definitely. So as you just said correctly, I'm looking into the crypto business for some time.
And I think it's also a good time to describe it from a historical perspective.
Because when I started with crypto in 2014, everyone only knew Bitcoin,
maybe still some people only know Bitcoin from crypto but there's
much more about crypto assets you mentioned it in 2017 the
ico hype and we had lots of pump and dumps so lots of scam activities and at
the same time when you say crypto not that many people understand what is crypto
actually because some people understand under crypto cryptocurrencies some understand
cryptographic techniques to just for administration
of information on the on the DLT and stuff like that.
So what we had and I would say after the first major ICO hypes in 2017-2018
when it went down, the global regulators, not just the European,
they realized that we have a lack of regulation when it comes to crypto.
Regulation doesn't mean that
we necessarily need to forbid or not allow doing business with crypto.
Regulation means first of all to understand what is crypto. So to have a harmonized
understanding of the crypto assets definition.
And before we start to do this podcast, I told you, Joe, maybe you shouldn't
call it crypto when we talk to UK or US people.
Maybe rather call it digital assets because crypto assets are defined in Europe
with this MECA and a harmonized definition.
So when we talk about crypto assets in Europe, we understand cryptocurrencies.
Utility token, anything which is not already regulated under the existing regulation.
When I say existing regulation, people know the securities regulation in Europe,
which is regulated by MIFID.
So everything which is non-MIFID, which is not regulated under the so-called
securities regulation in Europe, is nowadays going to be regulated under the MICA.
So regulation meant from the beginning having a harmonized understanding of
the product, of the instrument, crypto assets.
And this is something which I also see overseas in the US or let's say in UK,
which is something the first step to do.
Having a really common understanding what we define
as crypto assets and then the second thing why we need
the crypto assets regulation or why we started having the crypto assets regulation
also again going back in history when you look at the ICOs many people know
all of this funny white paper yeah I would say Mimi's you which you see in the
internet like you see a zebra in the front and in In the end,
a donkey comes out, which is a nice analogous or nice meme of describing how
an ICO document looks, a white paper.
The first pages, like very illustrative marketing pages, describing you like
the nicest zebra you can get. And in the end, you are lucky if you get a donkey.
So this is really how most of the ICOs went in 2017 and 2018.
18 people got promised lots of nice things
but in the end it turned out to be maybe a
company which is insolvent or bankrupt and there's no blockchain no dlt no nothing
and maybe you also think back joe when all this ico happened and then people
started started putting some celebrities some movie celebrities as their advisors
and their pictures and then someone saw it and made fun of
it and say okay nowadays all the uh ico companies
have all this movie and hollywood celebrates as advisors how
can it be and this is something which needs needed to be changed so consumer
protection protection from um yeah market abuse scammers um and also having
some really reliable players in the market the opportunity to do their business
because when When you think back of 2020.
Like four years ago, Germany was the first regulator putting in regulation.
Everyone said this is the end for crypto in Germany. But actually, it was the opposite.
With Coinbase, the first global crypto exchange player, being the first regulated
player in Germany, many others followed or tried to follow. eToro applied for license.
Binance tried the same. Others like Creighton and major players are going to
follow that approach to be regulated to be able to provide their activities
under a transparent regulated manner rather than doing something where no one
really knows is it legal,
is it illegal, is it grey, is it white or black.
When you've been talking about that, so the main reason is a protection of the
digital asset investors. Right.
The companies regulated should welcome
it because it will get more trust
to those players and therefore in the mid
to long term also get a lot of hopefully a lot
of new investors i do believe that's why all of them are going through the very
painful process of getting licensed and i i would be able to tell some stories
about that but i can't um but nonetheless it's it's not it's It's not a joyful experience,
but you have to see that the people on the other side, the regulators,
most of them also don't enjoy it, but they do see the value in it.
But you already referenced about
MIFID, Markets in Financial Instruments Directive, and now we're in MECA.
So MIFID regulates everything in financial markets and they just found the definition
everything that's not regulated under MIFID is MICA. Is that correct?
That is correct. So everything which is not already regulated under the MIFID regime and it is has some,
I would say investment purpose or some purpose to be exchanged or traded on
the marketplace or so called trading menu would be highly likely to be regulated under MICA.
And this is actually a good first entry into understanding what MICA is.
Before we get into that, we should say that MICA is a European Union regulation.
So it applies to all member states of the European Union.
Very likely Norway, Liechtenstein and Iceland will also follow some way and
also get this regulation into their legal framework.
And I'm not too sure about Switzerland, but I think they would miss an opportunity
if they would not jump on this train and show that their space is also regulated. Yes, exactly.
So the MICA, the Markets in Crypto Assets Regulation, very important. It's a regulation.
Unlike a directive, it does not need to be implemented into domestic law.
So it's directly applicable to all member states.
Plus, this MICA regulation is also applicable to the European Economic Area
jurisdictions like Liechtenstein and others. So there it is also going to be applicable directly.
However, we're going to see also some laws which are called implementing laws
or transitional laws because countries such as Germany or even Liechtenstein,
they have already some crypto regulation in place,
which is not in line or not harmonized with the MECA.
Therefore, such jurisdictions like Germany or Liechtenstein and some others,
they need to adopt or change or harmonize their domestic regulation with the MICA.
So in the end of the day, what we call in the European Union a single market
should be also available for crypto assets.
I see. Plus, we should also add that each of those member states has to follow the regulations,
but they can also make it tighter with national law and even limit it more so
that would also be possible here.
Exactly. Can you tell, let's go a little bit into the timeline before we talk
about what it means for companies, for entrepreneurs who are active or thinking
about being active in the digital asset space.
My understanding is that MICA does not necessarily apply right now to everybody,
but there's a phase where more and more of those regulations actually do apply. Exactly.
So the MICA itself, so the legal text is already effective since last year, end of June.
So since the 30th of June last year, the text has passed all the regulatory bodies.
So it is effective. However, it is always like this with EU regulation that
it's never directly applicable.
There is a timeline, a so-called transitional period, where the market players,
the regulators, and also those who provide the services have time to get used to the law.
This is a transitional period which takes up to 18 months.
And up to 18 months, because we have a two-phase approach.
The first phase ends after 12 months. This would be the 30th of June this year.
That's why we are talking today. Yes.
So 30th of June this year, we are going to face the regulation for the so-called stable coins.
This is everything which covers e-money token, asset reference token.
So in other words, all those U.S.
Tethers and USD circle and all the coins which have a purpose of being similar
to money, e-money, will be regulated already now.
Whilst the remaining crypto assets like cryptocurrencies and utility token shall
be regulated by the end of this year, which will be the 30th of December.
So you can say at the latest 30th of December this year in the entire European
economic area, if you want to provide services or issue a token related to crypto,
you need either a license or white paper.
So these are the two things, white paper for issuers and the license for service
providers, so-called crypto assets service providers, also called CASPs.
We will get into that later on.
But first, let us go a little bit through what Mika actually means for the entrepreneur.
Our understanding is now June 30th, 2024.
Some regulations come into force.
And at the latest on December 31st, 2024, all regulations apply within the European
Economic Area, which is the EU, Liechtenstein, Norway, and I believe Iceland.
Exactly. And this is the important part. So everyone who is still thinking of
doing some activities and it ends before the 30th of June, which is a very short
time, can do it now without breaking their heads over it.
But if you're planning to do something, even if it starts now, but it takes longer.
So, for example, you issue a token and this issuance will last,
let's say, six months or 12 months.
Then you will definitely need to look into the MICA regulation and you make sure if you need,
let's say, a white paper or if you need to have a CASP registered or licensed
CASP who is doing the services with you together.
And this is something which will not just apply for those living or being domiciled
or registered within a European Economic Area.
It also applies to those third countries like let's say you're sitting in Switzerland
or UK or the US and you're right now providing your services to the European market.
This will also apply to you unless you make sure that you use the so-called
reverse Reverse solicitation exemption.
Reverse solicitation for those who don't know it. Reverse solicitation means
that if you provide your services, but you're not actively targeting the European market.
Let's say you're like a new U.S. company and you have a web page which is mostly
targeting the U.S. audience.
But for some reasons, someone from the EU is getting to your web page,
asking for the services. In that case, you're allowed to provide the services
to the one asking for the services.
This is actually a fundamental right in Europe for any retail or for any customer,
the freedom to request services.
So you're allowed to provide your services to those who come to you by their
sole exclusive intention.
So you do not ask them to come to your webpage.
And then you're allowed to provide the services without having the license.
So this is reverse solicitation.
If you put this in brackets or this put outside the scope, everyone else who
is addressing the European market needs a license or a white paper.
And for those, how did he call it?
Reverse solicitation. Yes, exactly. We link down here in the show notes to it.
Does it mean you have to be a regulated entity somewhere in Singapore, in the US or in Panama?
Or does it just mean you're not directly marketing to citizens of the European
Economic Area living there or people living there?
And you just can't get out of this regulation with this little trick.
So it actually applies to anyone. So any company, any player outside of the
European Economic Area, so-called a third country, can provide its services
on this reverse solicitation approach. They do not need to be regulated.
Maybe they need to, but this is not of interest for the European regulator.
The European regulator only is looking at the laws which apply to the European Union.
So, for example, if you have a player, let's say, from China,
and in China, crypto asset services are not allowed, this is not important to
the German or to the European regulator.
It is only important that this Chinese crypto asset service provider is providing
its services solely on reverse solicitation and not targeting the European market.
So, and now we get to the core of it all. What does it mean for entrepreneurs?
First, what do they need to do? I do assume they do have to go to the national regulatory authority,
for example, in Germany, BaFin, and say, hey, guys, I'm this person,
I'm this company, I want to provide those services.
Of course, best is if you have a lawyer who asks these questions.
But basically, you have to approach the regulatory authorities best with a lawyer.
And hopefully, you've spoken to him or her a few times before and they prepped
you for this conversation.
Yes, I mean, it is basically how you say it, Joe.
You can also check it out. For example, some regulators like the Austrian regulator,
they have a very nice webpage, even in English. So it's a financial market authority in Austria, FMA.
So if you just put in Google FMA and then Mika, you will straight get to their
webpage and you find some information.
So you can go and approach your domestic regulator.
You can even go to any regulator. So if you are located in Europe,
you do not need to go to your own regulator.
Let's say you're in Germany, you do not need to go to BaFin,
to the German regulator. You can also approach the Austrian regulator.
This is also the nice thing about Europe.
We do not really know borders. It is all borderless.
It also applies if you have a license for your activity, you can provide the
services to the entire European economic area, which is called passporting.
So the first step you would do, you would first try to understand if your product
or your service is regulated under MICA. You can ask, for example,
for a quote, no action letter.
No action letter means that the regulator confirms to you that,
for example, you're not regulated because your product is for some reason not
under Mika and not regulated at all.
That means you don't need to take action, right? Exactly. Exactly. Yeah.
Or you also have a different trade. We differentiate between the issuer.
An issuer is someone who is issuing a token. So doing an ICO, for example.
For example, from those who provide services, which is a crypto asset service provider,
a crypto asset service provider is, for example, someone who's running a crypto
exchange or doing the custody for crypto assets, whilst the issuer can solely
do the ICO and not doing anything else.
So if you only do an ICO and you do not do anything else, you usually do not need to have a license.
What you need to do is you need to have a document in place,
a so-called white paper.
And this white paper, I said it in the beginning, is not this funny marketing
white papers you had back in 2017.
It is a very formalistic and standardized document which needs to look exactly
as the regulator is telling you it has to look.
But now it comes. This document does not need to be approved or accepted by the regulator.
You only need to notify the regulator, which means 20 days before you want to go live with your ICO,
you send the final document, your final white paper to the regulator and tell
the regulator, look here, I'm planning to do an ICO in, let's say, 20 days.
This is the document me and my lawyer, we have finalized.
Have a look at it and then publish it on your web page. I'm going to do the
same on my web page and then I'm going to go live in 20 days.
Then maybe the regulator comes back to you and says, you're fine to go.
Or the regulator says, are you really sure that your document you have produced
is in line with the standards and you have not forgotten something?
And I think that the regulator will do this in the beginning.
And after some time, the regulator will not do it anymore because the regulator
is really not in charge for accepting or reviewing the document.
They would just collect it and have a look at it and see if it's really complete.
And this one you have to differentiate from those who want to provide a service.
And the one who want to provide a service, they really need to have a license.
And they apply for the license, then they get the license, and then they can
provide the services to the whole European economic area.
And this is two different categories of players in the market.
The issuer and the crypto asset service provider.
So white paper and the license. From your personal experience as a lawyer,
as a partner with Aniton, how long should an entrepreneur estimate to finish
this white paper with a lawyer?
Is it something like 12 months or 12 days? So we have nowadays some tools which
are available free to use in the Internet.
So with such tools, everyone can produce its white paper within a couple of days.
However, the detail work, the fine parts, which are also critical things,
which may raise liability.
I talk about civil liability for the issuer. This may need a little bit longer
and also the description of the technological background of the blockchain use
or DLT use and stuff like that.
This could take a little bit longer. So I would say anyone who wants to do an
ICO nowadays and plans to do it for the next two or three months should plan
with two to three months in advance.
And two to three months, I think that's a good timeline and then do that. However, now it comes.
There's one category of token, which is the stablecoins.
For the stablecoins, either it's an e-money token or an asset reference token,
not everyone is allowed to issue such a token.
For example, an e-money token, you're only allowed to issue if you're an e-money
institution. This is a licensed player.
Asset reference token, you should be a bank or to have a license as an asset
reference token issuer under MICA, which is very close to a bank.
So for these two categories, like the stable coins under Anamika,
you should be aware that only a white paper is not enough.
You need to make sure that you have to be an e-money licensed company or bank.
And this is something special.
Okay, let me try to work this out a little bit.
So what I want to say, what you already said is, you get this white paper to the regulator,
they don't have any objections, but it still does mean you are liable for everything
that is in there is important legal document.
And just don't Google the pieces, I put them together.
Ask a capable lawyer, please, guys. On the other hand, as you already referred,
there are these service providers, crypto asset service providers.
So that means as an entrepreneur, you You can still do your ICO,
you prep your white paper, but then you do have to work with people who are
licensed, providing all those services.
What I, for example, do have in mind is somebody safekeeping of the assets of
the cryptos on behalf of the digital assets, on behalf of the investors.
Something like a custodian bank has done in the past. Also, as you said, stable coin.
That means one of your coins refers to one euro.
Then you're in a much higher regulated field.
Then maybe you should more think about three years than three months of preparing this.
Plus, if you want to be, as you said, an asset reference token.
So that means I do believe it refers to tokenization of securities. securities, right?
So it simplifies the securities trading,
especially in the European Union, but I do believe soon across the world,
where you just have a crypto token that is traded that is bust around on behalf of a,
physical security of a share of a bond of something else, right?
Yeah, so you're almost 100% right. So you could be easily a lawyer, Joe.
No, no, no. No lawyer, please.
So the e-money token is a token which refers to one fiat currency.
So you could be, for example, a U.S. dollar token or U.S. dollar currency.
So USDC, for example. In contrast to that, the asset reference token is referring
to at least two instruments which are in the portfolio, in a bucket.
It could be a currency. It could be, as you said, a security.
It could even be a cryptocurrency, which is lying in the bucket.
The best example for that is the U.S. Tether.
If you look at the U.S. Tether and you look at the basket of instruments which
lie with the Tether Foundation, You can see there are, I think,
six or seven or eight different assets,
even gold and some other assets are lying there.
And so if you go back with your U.S. Tether to the Tether Foundation,
you can even get, instead of cashback, you can get, for example,
gold or a U.S. dollar bond or something like this.
You can redeem debt. And as you just said it correctly, if you have such an
instrument and it's backed by some assets where this asset really needs to be
there, so with that you guarantee the stability of the coin.
If you look from that perspective, then you really understand why not everyone
is allowed to issue such a coin.
Otherwise, I would say the scamming industry would just rise with this possibility.
Therefore, there is some reason
why only e-money institutions or a bank is allowed to issue such a coin.
So bottom line is for me right now, if you want to do an ICO,
you need to look at what services you want to provide with the token and have
somebody who is legally able to provide all the services around it,
for example, issue interest,
dividends and so on and so forth.
Everything you want to do with that everything that need
to be serviced you need somebody who's licensed to do
that and of course stable stable coins
or asset reference tokens it's a completely different ball game here um what
other regulations do apply if you if you do want to ico a token for example,
what they're like a salient things such a token can do.
We now know it cannot reference to so called fear money, that fiat money that
official currencies, think Japanese yen Korean one, Brazilian real US dollar,
euros, pound, and so on and so forth.
Plus also securities, I do believe.
Yes, I mean there is a very complex list of rules and obligations and as you
said we really have to differentiate.
So if you're the issuer, for example, and you want to issue an e-money token
issuer and you want to issue a Euro-backed stablecoin, for example,
you're not allowed to issue interest.
You're not allowed to pay interest to the users and you're not allowed to take
the money and work with it.
That's forbidden. If you have asset reference token, you are allowed to do that.
You're allowed to work with the money and you to pay out interest.
But then again, there's a bucket of so-called significant e-money token.
A significant e-money token has the exemptions which apply to asset reference token.
So significant e-money token, you are allowed to take the money which you receive
from the users or from the investors to work with that and to pay out interest.
Interest however you have to uh you're not
allowed to take all the money you have to keep let's say 30 percent
as a risk buffer available similar to
a bank which keeps when it gives out loans like 12 percent
or 19 percent yeah and these are things which
are very detailed very complex that's why i would say um we should not talk
that much about the stablecoin issuers maybe we go on and talk about the cryptocurrencies
and utility token because i would say we see much more of those coming and also
maybe related services to them, like a crypto exchange,
as you said, a custodian, like a safekeeper, crypto portfolio management,
crypto advice, all of their things which are also coming, which are not necessarily
dependent on the issuance of the token.
You can also take an existing token like Bitcoin or Ethereum or others who are
already existing and provide services to them.
Sure, that that will be the next part, because I just want to get like the big
guys out of the way to get to this area.
So we already talked about like the custodians who keep the tokens safe,
the exchanges where you can basically trade them.
Can you talk a little bit about how the European Union envisions such an environment,
such an ecosystem with the regulated entities?
Because as we said, you have a crypto token, you have a utility token that we
now go on a little bit to talk about where you basically explain the makeup world to us, right?
Yes, yes, exactly. Exactly. So basically, you can say really as a rule of thumb,
but in a nutshell, when you have a stable coin, like an E-Money token or an
asset reference token, the highest regulation applies out of Mika.
If you have a utility token or cryptocurrency, the regulation is less tough, less strong. Yeah.
And therefore, which is actually, I would say, also strange,
because if you look at the Mika timeline, as I said in the beginning,
from the beginning, the rules on the stable coins apply from the 30th of June
this year, whilst on the less critical token like currency token, utility token,
the rules apply from the 30th of December.
I believe, honestly, they did it like this because if you think back,
when Facebook wanted to issue its own token and to do their own wallet,
like with Diem and Libra and all of that, the European regulator was very nervous about that.
And they wanted to have very quickly a regulation in place to cover the Facebook
Libra slash Diem association project. However, as you all know,
they've left Switzerland.
This project was never launched in the European economic area.
And therefore, I think we're a little bit too fast with the toughest regulation,
which is a stablecoin regulation.
I think we should have done it the other way around. You know,
you have the regulation for utility token, currency token apply first so that people get used to that.
You always start with the easier things and then you have the stronger and the
tougher regulation later coming.
So I think this was already a wrong move of the European regulator.
However, it is what it is. Therefore, we also started talking about the stablecoin
regulation before we go on with the utility token and currency token.
However, as you were asking how the regulator.
The European regulator, but also the National Common Authority,
so the domestic regulators, envision the regulation of cryptoassets,
I think they really envision it as having one industry of utility token cryptocurrencies
like what we already have now, like with all the crypto exchanges like Binance,
Coinbase and so on and so on.
This is like, I would say, the old game with new rules. And then we have the
new game, which is the stable coins, which is a tough regulation.
So the new games with new players such as e-money institutions and banks will
be regulated very, very tough.
And I think basically the regulator imagines this new product in this new world
to be in the hands of the existing players, like the existing banks and the
existing e-money institutions,
because they already have a license.
So for them to issue this token like a stable coin is not that difficult.
They only need a white paper and then they can start doing it.
While it's a startup like Circle or even Tether, if they want to offer their
stable coins to the European Union or to the European market,
they would need to first apply for a license, which takes very long,
which is not that likely or not that easy to get.
And then they would be happy to continue providing their services to the European
Economic Area. I would, in my position, if I would be U.S.
Tether, probably this is the reason why Tether is not really entering right
now the European market.
Think of, is it worth it? Is it worth it to enter the European market or continue in Europe?
Maybe I should just continue with Africa and Asia and, I don't know,
the Middle East, yeah, where you do not need to have a stable country regulation license.
I see. so a lot of a lot of.
Interesting thoughts in there. So basically, what the European Union is trying
to do is all digital assets that are close or very similar to financial services,
push them towards financial services.
And there is some that are left.
And basically, that's a space you can move in as an entrepreneur.
Did I get you right some way here?
Yes, yes, you got me right, Joe. So if you're like from the DeFi sector or you're
like from the sector where you have always issued utility token,
the European regulator is fine with it, that you can continue with that.
Just make sure that you have your white paper in place.
And if you want to provide custodian services, if you want to provide a platform,
a marketplace where people can trade your cryptocurrencies and utility token,
broken, make sure that you have a license as a CASP. Yeah, that's basically it in a nutshell.
And we should not forget why we have all of that regulation.
And this is, I think, very important. The origins of regulating crypto assets,
like the origins also of regulating all of financial instruments,
comes from the anti-money laundering rules and obligations,
which are suggested on a yearly basis by the Financial Action Task Force, by the FATF.
And the Financial Action Task Force, if you think back, it was in December 2013
already, was the first international body which said we need to have regulations
in place for virtual assets, for virtual asset service providers.
So if you want to understand how the regulation evolves or develops for crypto
assets, always have a look at the FATF.
Always look what the FATF is recommending.
Always look what the FATF is publishing. it all goes hand in hand.
So anti-money laundering rules and regulation of service providers goes really hand in hand.
So that means basically it's not necessarily all the questionable things that
have been going on in the digital asset market that have been triggering this.
But money laundering, tax avoidance, terrorism financing, those have been the harder pieces.
And that's why everything was pushed towards regulated entities who already
have to comply with the respective regulations there.
Exactly, exactly. And this is the, we call it the so-called obligated parties,
or some would say intermediaries.
And this is actually exactly what the DLT, the distributed ledger technology
does not want to have intermediaries.
Yeah. So it doesn't really match or fit, but somehow the regulator is trying
to match it and to fit it or to make it be fit.
And this is also the reason, for example, why if you have a pure DeFi,
so a decentralized finance player, which is not having any intermediaries,
this player will not be regulated by Mika because the Mika is only applying
to intermediaries, to people, to obligated parties.
If there is no intermediary or no one who has the stakes in hand,
such as a really truly decentralized finance environment, then the Mika is not applying.
Adi Reza, I would say those are really interesting closing words.
We're running already around 40 minutes for our recording, which is a little bit on the longer side.
I nonetheless I hope to have you back pretty soon and then we can talk about some other.
Legal framework here that our audience needs
to be aware of great thank you Joe if anyone is
interested to to tune in we have a also a
web page paytechlaw.com check it out or
if you want to connect with me on LinkedIn I'm very active there just connect
there thank you Joe probably my pleasure everybody who'd like to learn more
go down here in the show notes there's a link to pay tech law as well as to
your linkedin profile and your company website have a good day bye-bye.
Music.
That's all folks find more news streams events and interviews at www.startuprad.io
remember sharing is caring.
Music.