zone

In brief

• The EU risks becoming a “flyover zone” as its regulatory approach to crypto is outpaced by the U.S. and APAC, said an exec at asset manager Franklin Templeton.
• While MiCA placed the EU in the “forefront” of crypto regulation, it risks falling behind as jurisdictions emerge with more flexible approaches to digital assets, Franklin Templeton’s Catriona Kellas argued.
• The EU is “asking the right questions,” with “more than whispers” about an update to MiCA.

The EU risks becoming a “flyover zone” for crypto as the pace of legislation lags behind the U.S. and Asia, according to an executive at asset management firm Franklin Templeton.

Speaking at the DigiAssets 2025 conference, the firm’s International Legal Lead for Digital Projects, Catriona Kellas, argued that while Europe is in a “strong place,” there are concerns that it “could become a flyover zone between the US and Asia.”

She lauded the “energy that’s coming from the United States,” which is providing an energy boost in Europe.

“There is a real risk with this technology that jurisdictions which were perhaps at the very forefront a few years ago—it’s so easy to fall behind if it takes a long time to go through your legislative process,” she said, pointing to “other jurisdictions” with more flexible approaches to the crypto sector.

The European Commission appears to be taking notice, she said, recalling a recent talk where, “they said a word that I’d never heard them say before, which was ‘competition’.”

“They’re definitely asking the right questions,” Kellas said, adding that there are “more than whispers” around “MiCA 2,” an update to the Markets in Crypto Assets legislation that came into force in June 2023. “It’s definitely, potentially coming,” she added, hedging her bets somewhat.

Kellas also flagged the EU’s DLT, or distributed ledger technology, pilot regime. It’s meant to provide crypto companies a sandbox in which to operate while regulators observe how things pan out. It’s only been in effect for a year, but officials are “trying to renovate and make sure that it’s fit for purpose.”

MiCA 2 incoming?

Amid the “healthy energy that’s going to start coming out of Europe,” Kaye suggested that concerns that MiCA 2 could prove to be more restrictive “may be lessened, as we see some of Europe looking to what’s going on in the U.S. and what’s going on in APAC.”

The crypto industry isn’t sitting around; just this week, reports revealed that crypto exchanges Coinbase and Gemini are angling for operational licenses in Luxembourg and Malta respectively, which would enable them to operate across the EU’s 27 member states.

Some EU regulators have reportedly raised concerns over the rapid pace of “passporting” approvals in some jurisdictions, which prevent EU states from blocking Crypto-Asset Service Providers, or CASPs, once they’re licensed to operate in one state.

As global adoption of digital assets becomes more entrenched, Kaye anticipated an “institutional attitude change” among regulators and lawmakers around the world. “It’s quite difficult to put that back in the box and go back to a more risk-averse approach,” she said.

Looking at regulatory enforcement, she added, “We’re thinking about that soft regulatory approach, which you know can be just as challenging to opt to manage as what’s written on the page.”

Increasingly, Kaye suggested, “What we’re really seeing is is regulators being challenged by their governments, being challenged by their leaders to make that change, and not just think within the box that they’ve always been presented with.”

Edited by Stacy Elliott.

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