As the likes of Gary Gensler and the Securities and Exchange Commission (SEC) have not hesitated in demonstrating, the US is by far and away the biggest regulations hotbed when it comes to crypto in the West. In turn, this has seen many DeFi entities seek refuge across the pond in Europe.

As previously reported, recent investment decisions between the two regions have diverged in recent months, where as intuition would suggest, it’s been the Europeans that’ve been more bullish on crypto spending.  

With this in mind, this article will cover two other European DeFi updates in recent times - albeit not necessarily bullish ones. These include new crypto tax data sharing measures, as well as how Central, Northern, and Western Europe (CNWE) has become the second largest cryptocurrency economy in the world.

It’ll also briefly discuss Coinbase’s new Irish adventure, as well as Elon Musk’s pondering of removing Twitter/X from EU markets. 

The New EU Crypto Tax Rules 

Per rules that were accepted on Tuesday, Crypto firms in the EU (and therefore not Europe in its entirety) will have to report customers’ holdings information, which will then be automatically shared among different tax authorities in the region. 

Dubbed the ‘Eighth Directive on Administrative Cooperation’ (DAC8), the new rules have been enforced in an effort to block EU assets from being stored overseas via blockchain means. More specifically, the new rules relate to stablecoins, NFTS, DeFi tokens, and proceeds from crypto staking.

With information on such assets being shared among relevant authorities, the DAC8 is designed to improve the processes of identifying tax fraud, avoidance, and evasion in the EU. It also comes complementary to the recently-instated Markets in Crypto Assets Regulation (MiCA) and other anti-money laundering rules under Transfer of Funds Regulation (TFR) - which, as you’ll later learn, have helped expand Europe’s crypto adoption. 

For context, MiCA is an EU effort to introduce a pan-European regulatory framework for crypto companies - where in encompassing all 27 EU member states, it’ll deploy public protection operations through imposing a number of regulations on crypto firms. 

After being proposed last year and accepted by (unelected) EU ministers earlier this week, the DAC8 will be inaugurated into the official EU journal on Monday 4th November. 

Given the EU nature of both the DAC8 and MiCA, such news won’t directly affect the British readers amongst you. That being said, the UK’s perennial close-ties with its neighbouring nations means that the country will probably still be impacted by the regulations in one way or another. 

Europe Crypto Growth 

Per a recent report from Chainalysis, Central and Western EU and non-EU states (which, with regards to the latter, includes countries such as the UK, Norway, Finland, Iceland, Serbia and Albania) accounted for as much as 17.6% of global crypto crypto volume between July 2022 and June 2023 - which in terms of numbers, totals around $1 trillion worth of spending. 

Such figure only comes second to its Western counterparts across the pond, as North America - despite its regulation onslaught - accounted for over 20% of all crypto trade volume. 

Although MiCA frameworks won’t come into force until next year, its recent approval has meant that EU DeFi entities have already enjoyed de facto regulatory clarity when it comes to crypto matters. In turn, this sense of security was thought to be the catalyst behind the region’s relatively strong crypto stance. 

The Chainalysis report focused on on-chain data, which found that large institutional investors (a.k.a. crypto whales) were the biggest contributors to Europe’s crypto spending over the given time period. Here it’s thought that whales were responsible for the majority of trading in the region, as retail investors (i.e. ordinary people) only accounted for well below 10% (a circumstance that is usually observed across all global regions).  

When it comes to what MiCA offers the region, the new regulatory framework will potentially help integrate cryptocurrencies into mainstream finance once implemented in mid-2024, which will then have an influence on crypto adoption rates across the region due to the clear and uniform crypto rules it provides. 

Many of the rules to be derived from MiCA will be focused on enhancing customer protection within crypto contexts, which could then further foster a greater sense of trust among European crypto adopters due to the safe trading-haven they have at their hands. 

Coinbase Opts For Ireland as New Regulation & Operations Hub 

Another recent crypto news story from Europe was Coinbase’s choice of Ireland as its main EU regulation and operations hub - a country that it’s no stranger to given that its Dublin office currently employs around 100 staff members. 

To do so, the leading centralised exchange submitted its licence application with the Central Bank of Ireland under the EU’s MiCA regulation. If - or when - it’s approved, Coinbase will then have a universal ‘MiCA’ licence in Ireland which it can then use to ‘passport’ its services to other EU countries. 

Intuitively, such system will make it easier for the exchange to launch new crypto products and services in the region, as it won’t have to file for individual licences in each country. 

Crypto Twitter (X) to End in Europe?

A final European DeFi matter worth noting is the possibility of ‘crypto Twitter/X’ leaving Europe amid claims of the Elon Musk-owned platform being axed from the EU.  

Such news comes amid concerns that X can’t comply with the region’s Digital Service Act (DSA) - which is essentially regulations that relate to clamping-down on illegal content, transparent advertising, and disinformation.

Catalysed by the geopolitical carnage in the Middle East, the X landscape is currently engulfed in a myriad of uncensored speculation, with much of this at risk of being deemed misinformation (and therefore in violation of the DSA). 

Of course, this is all fuelled by Musk’s commitment to allowing ‘free speech’ in its purest form on the platform. With this in mind, X is currently being investigated for its DSA violations - where if found guilty, it may have to pay fines worth as much as 6% of its global revenue. 

Although an EU-blockade would most certainly be detrimental to the app’s user base, it’s a possibility that Musk was already considering before the investigation began. This is due to his desire to cut costs outside of his beloved US - something that he’s already embarked on through ordering the closure of international offices in South Korea, Australia, Paris, Berlin, Madrid, and across Africa. 

And finally, when it comes to EU-residing Crypto X users, their inability to access the app would most certainly be of detriment to how they access and publish news/thoughts relating to the top crypto coins, industry rumours, and general crypto pop-culture. That being said, the (likely) tech-savvy EU X user base may still be able to access the platform using a VPN.

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This article is intended for educational purposes and is not financial advice.