Overregulation threatens to remove Europe’s edge in digital assets, says Wojciech Kaszycki, CSO of BTCS.
Summary
- Regulatory divergence between the U.S. and the EU is accelerating
- Tether, the largest stablecoin on the market, is actively banned in the EU
- Each EU country must pass its own law to interpret MiCA, creating inconsistency
A few years ago, Europe looked like the leader in crypto regulation. Today, that leadership is slipping. As global regulatory frameworks for crypto begin to crystallize, stark differences are emerging between the U.S. and the European Union.
To discuss crypto asset regulation in the EU, crypto.news spoke to Wojciech Kaszycki, CSO of BTCS, a Polish-based Warsaw-listed infrastructure and active treasury firm. He explains why regulatory overreach is slowing innovation across the EU, while the U.S. moves faster than ever.
crypto.news: You recently highlighted a report from the Financial Stability Board showing that there’s growing regulatory divergence around stablecoins and crypto across jurisdictions. What does that divergence actually mean, and who’s benefiting from it?
Wojciech Kaszycki: If you look at what’s happened over the last year or so, it’s clear we’re seeing a global realignment. Take Qatar, for example. It had to navigate tensions with the U.S. and European governments, yet today it’s home to the most profitable company in the world. At the same time, we’ve seen the U.S. implement the GENIUS Act, and most people aren’t even aware that a significant portion of Visa transactions are now settled in USDC. That would’ve been unthinkable 18 months ago.
In Europe, you have the Markets in Crypto-Assets (MiCA) regulation, which essentially bans the use of stablecoins like Tether by exchanges and wallets. They’re not allowed as a payment method anymore. Meanwhile, other stablecoins are being approved, many of them directly tokenizing fiat currencies.
So we’re seeing a complete shift. Companies that were previously locked out of financial systems have become multi-unicorns. A whole new market has emerged. This isn’t about speculation — it’s a broader trend. In the U.S., the GENIUS Act is about making the U.S. dollar more dominant globally by enabling tokenized forms to move more freely across jurisdictions, leveraging blockchain rails. Europe seems to be doing the opposite. In my view, the EU completely misread the intention behind the GENIUS Act.
What’s fascinating is how roles have reversed. A few years ago, Europe was seen as more open to blockchain and stablecoin innovation. The U.S. was restrictive. Today, it’s flipped.
CN: Why do you think Europe used to be ahead?
WK: It goes back to the previous SEC chair in the U.S. There was a lot of scrutiny. Projects were getting blocked, and there was speculation that stablecoins might be made illegal, as only banks could issue what were considered “means of payment.” Europe, on the other hand, operated in a more unregulated space, which gave commercial freedom to innovators.
That changed when the U.S. pivoted. Now, if the EU had implemented their frameworks in a more effective way, they could’ve stayed ahead. But that didn’t happen.
In the U.S., there’s one regulator — the SEC. In Europe, every country has its own version of the SEC. So while MiCA says “here’s the framework,” each country has to implement its own law to operationalize it. In Poland, that interpretation is over 300 pages. In Malta or Cyprus, it might be just 11. That’s a huge problem.
Guest: Exactly. Europe overregulates. And now, with Trump back in office, deregulation is gaining traction in the U.S. There was once a simple legal principle: “If something is not forbidden, it’s allowed.” That helped drive innovation. Bureaucrats reversed that. Now it’s more like: “If something is not explicitly allowed, it’s forbidden.” That stifles new ideas.
CN: This is interesting. Why would Europe not lean into decentralization to counter the dominance of U.S.-based Web2 giants?
WK: That would have made sense, and many of us expected that. But the reality is different. Smaller EU countries — Estonia, Latvia, Lithuania, Cyprus, Malta — have done relatively better with regulation because they’re small enough to adapt quickly and enforce policy more easily.
But here’s the issue: EU law overrides national law. So every country ends up with additional layers of regulation on top of EU frameworks to make sure they’re compliant. That means every member state ends up with stricter regulations than the base directive. And the smaller countries can adapt more easily to this complexity than larger ones.
CN: Are there any examples of how that fragmentation plays out?
WK: Sure. Look at the Electronic Money Institutions (EMIs) in Lithuania. A few years ago, you could buy an EMI license for around €100,000, get a lawyer, and have it up and running in 3–6 months. These institutions could do nearly everything a bank could — except take deposits or offer credit.
Now it’s harder to get an EMI license than to start a bank. Why? Because there were some bad actors, and regulators responded by clamping down. Even though the damage caused by EMIs was minimal compared to scandals in traditional finance, like the Danske Bank case, crypto is an easier target.
In Poland, proposed legislation would impose twice the penalty for operating an unlicensed crypto exchange compared to an unlicensed bank. That says everything about the regulatory mindset here.
CN: What should change in terms of regulation? Are there elements of the current framework that are useful or worth keeping?
WK: We should have a two-speed system: one for large entities like Binance or Kraken that operate at an institutional scale, and another for startups and smaller innovators.
Major exchanges should be regulated just like traditional financial institutions — same oversight, same expectations. But innovators need room to experiment. We should have something similar to regulatory sandboxes or small payment institution licenses, with limited compliance obligations and clear operational boundaries.
Otherwise, you’re not killing innovation — you’re just driving it somewhere else. People will go to Dubai, Singapore, and Costa Rica — places where the laws are more accommodating.
Another big problem is who is doing the regulation. The SEC’s mission is market safety — not innovation. Their job is to ensure financial markets function safely and predictably. That’s fine, but it doesn’t support the kind of risk-taking that fuels technological breakthroughs.
Instead, we need dual-track governance: one regulator focused on innovation and experimentation, and another focused on safety and oversight. They should work together — so when something innovative reaches the scale or scope of financial markets, it transitions into the purview of traditional regulators in a safe, supervised way. That’s how real, sustainable innovation happens.
CN: Are EU regulators open to that kind of dual approach?
WK: Not really. Right now, the approach is: “Let’s regulate crypto. Let’s get it under control.” In some countries, MiCA licensing has been made deliberately difficult — not to encourage compliance, but to limit participation. Some regulators want only three or four large, easily controlled players. That’s how you kill innovation in Europe.
It’s not that MiCA is entirely bad. There are positives — for example, it clearly defines what stablecoins are, and it acknowledges tokenized e-money. But again, the issue isn’t the law itself — it’s how it’s implemented. We approach regulation with suspicion, assuming the worst. So we impose extreme penalties and overly strict interpretations, and that undermines the potential.
Let’s shift to DeFi. Where do you think we are globally and in the EU in terms of regulating decentralized finance?
WK: To be honest, we’re nowhere. Regulators are treating DeFi purely as financial activity, instead of starting with the underlying technology — blockchain. That’s the wrong approach.
Let’s say someone builds a lending protocol that works just like Aave but isn’t decentralized. It’s just a centralized database with a web UI. That system would fall under existing financial regulations — derivatives, lending, etc. Everything is already defined.
But DeFi is different. It’s a technological model first, and a financial model second. We should treat it that way. If we started with the tech layer — how blockchains operate, how data is stored, how smart contracts interact — we could build a far better regulatory model that reflects how these systems actually function.
Today, DeFi projects set up foundations overseas just to avoid the “who’s responsible” question. That’s not healthy. We need clear, transparent ways to launch and operate DeFi protocols legally and safely, without killing innovation.
CN: Are there legal tools already in place that could be adapted?
WK: Definitely. For example, in the EU, we already have crowdfunding licenses. You can receive a license for a crowdfunding platform — and crowdfunding is essentially one part of DeFi. Debt financing, yield products, tokenized equity — it all overlaps.
The legal pieces exist. They just need to be linked together coherently. The danger is that regulators will take the easy route and say, “This is financial — let’s give it to the banks.” If that happens, DeFi won’t die — it’ll just move to other jurisdictions. That’s what always happens.
Right now, most DeFi protocols are not compliant with things like AMLD5 or AMLD6. That’s a real challenge. But we’ll find a way. The key is having open-minded policymakers, like what we’re starting to see in the U.S. The EU still feels far behind on this front.
CN: On a different note, Poland’s had strong recent growth. Was that tied at all to crypto or digital asset innovation?
WK: No, not really. Most of Poland’s recent economic growth stems from the war in Ukraine. We’ve had a large influx of Ukrainian refugees, which brought labor, consumption, and also logistics related to aid. We’re also a large EU country and benefited from timing and macro trends.
Unfortunately, this growth has little to do with blockchain or digital assets. Our regulators are still very skeptical. Just recently, the head of our national securities regulator publicly said crypto is essentially a scam — totally dismissive. It’s an outdated view.
CN: Is there anything else you feel isn’t being discussed enough?
WK: I think we’re missing how digital asset management companies (DACs) are quietly driving mass adoption. Everyone talks about DAOs, but DACs are where institutional money is entering the space.
Here’s why: Not everyone wants to hold private keys or deal with seed phrases. Many people simply want exposure to digital assets without the friction. That’s what DACs offer — brokerage-like experiences, custodial solutions, or investment products that feel familiar. That’s a signal of mass adoption.
And it’s not just retail. Many EU jurisdictions offer tax advantages for investing via certain legal structures — family foundations, alternative investment schemes, etc. — but crypto isn’t a recognized asset class in many of these regimes. DACs can bridge that gap. That’s a huge on-ramp.
