One Industry, Two Pathways: the Transatlantic Divide in Crypto Regulation

While the industry broadly welcomes the establishment of clear regulatory frameworks, the contrasting approach between the world’s two largest economies will have a far-reaching impact – the US has a total gross domestic product (GDP) of $27.2 trillion compared with nearly $20 trillion for the EU.

A bank-like framework

The EU has embraced a comprehensive regulatory framework through its Markets in Crypto-Assets Regulation (MiCAR), which entered into force in December 2024.

This “license-and-passport” system extends traditional banking principles to the crypto sphere, allowing providers licensed in any EU member state to operate across all 27 countries.

MiCAR's foundation rests on four core pillars that mirror traditional financial oversight:

Compliance and Security: Mandatory anti-money laundering and counter-terrorist financing protocols, coupled with robust IT security requirements and operational resilience standards.

Capital and Governance: Adequate capital reserves and comprehensive risk management frameworks that echo traditional banking regulations.

Consumer Protection: Enhanced safeguards for retail investors, addressing the EU's concern that most digital assets originate outside its borders.

Monetary Sovereignty: Support for a digital euro as a central bank digital currency (CBDC), viewed as essential for protecting European monetary independence.

Digital euro

“A digital euro would limit the potential for foreign currency stablecoins to become a common medium of exchange within the euro area,” said European Central Bank (ECB) board member Piero Cipollone in a recent statement. 

The digital euro project has progressed from investigation to preparation phase, with technical development on track despite remaining political hurdles. Legislative approval could arrive by late 2025, potentially leading to a 2027-2028 launch.

Regulatory consistency naturally comes with a heavier compliance requirement for European operators and investors, especially for stablecoin issuers and crypto service providers. Strict EU regulations from MiCAR demand bank-like requirements, including robust risk governance and strict anti-money laundering controls.

Costly compliance

Complying may be costly and take up resources, making it difficult for smaller, less mature players to enter the market. 

For long-term investors, this signals a more institutional, risk-managed market, but one potentially less fertile for rapid innovation or speculative returns.

The US has chosen a fundamentally different path under the Trump Administration, prioritizing innovation and market growth over comprehensive regulation.

A January 2025 Executive Order from the White House explicitly rejected CBDC development, instead mandating protection of Americans "from the risks of CBDCs, which threaten the stability of the financial system, individual privacy, and the sovereignty of the United States."

America's innovation-first gambit

The US strategy centers on several key initiatives:

Stablecoin Supremacy: Viewing dollar-backed stablecoins as tools to strengthen US monetary influence globally while supporting domestic innovation.

Regulatory Relief: Sweeping legislation to govern stablecoin usage, eliminate liability rules for DeFi developers, and end antitrust litigation against crypto firms.

Strategic Reserves: Exploration of a federal Bitcoin reserve, signaling institutional acceptance of cryptocurrency as a strategic asset.

"By taking a whole-of-government approach to crypto, the administration is making a significant first step toward writing clear, consistent rules of the road," said Nathan McCauley, CEO of institutional crypto custodian Anchorage Digital.

By contrast, the current US regulatory position favours entrepreneurism and innovation. The rejection of a CBDC, alongside promotion of DeFi development, stablecoin issuance, and encouragement of a federal Bitcoin reserve, points to a more open environment for growth and capital formation. 

Well-managed ventures may find faster returns, less burdensome regulations and greater flexibility to pursue dealmaking and acquisitions. Furthermore, lower barriers to entry will give room for start-ups and small-scale investors to find success in the US crypto market. 

However, this comes with regulatory uncertainty at the federal level and potential reversals in future administrations, introducing greater political risks. Furthermore, the lack of precedent adds a level of opacity to the crypto industry in the US. 

Implications

From an investor’s standpoint, the EU’s MiCAR framework offers clarity and predictability through the unified license-and-passport regime. Except that the issuing process is currently not uniform with some countries, most notably the Mediterranean island of Malta, which has faced criticism from some EU regulators for “hastily” issuing licenses.

By implementing bank-like requirements, the EU is mirroring its existing approach to govern the entire bloc. In the US, most regulations and crypto policies have not been previously tested in any context and thus open the door to unknown risks. 

Investors may find the US to be a faster-moving, opportunity-rich market, but with higher regulatory volatility and policy shifts tied to electoral outcomes.

Understanding where a crypto project is domiciled, how tokens are issued and governed, and what jurisdiction governs digital asset custodianship will be critical. Market participants will live or die not only by their trading acumen and knowledge of the markets, but by how effectively they navigate these two different regulatory philosophies.