The Crypto Queen of the EU falls at a crucial moment

In legislative terms, the world of cryptocurrencies is still evolving. And as the dust settles from the collapse of FTX, MEPs (members of the European Parliament) are wondering exactly how to deal with this wild west of finance and technology.

There is an element of political drama in the mix. On Dec. 9, Eva Kaili, the so-called “crypto queen” of the European Parliament, was arrested over corruption charges that rocked the 27-member bloc. Police raids seized €600,000 worth of phones, computers and cash from Kaili and three others, who have since been charged with corruption. Prosecutors suspect Kaili took illicit funds to lobby on behalf of Qatar, the recent host of the soccer World Cup.

Several hundred thousand euros were found in a suitcase in a Brussels hotel and 150,000 in Kaili’s apartment. Police searched 19 residences and Kaili’s father was among those arrested. Her family’s assets in Greece have since been frozen.

Kaili has denied the corruption allegations, saying he is innocent and “has nothing to do with corruption from Qatar”.

While his arrest has fascinated EU politicians and observers, it also presents another uncomfortable association with the cryptocurrency industry. After the collapse of Terraform Labs and FTX, the average moviegoer can be forgiven for thinking that the industry is full of scammers. Eva Kaili’s arrest only adds to that bad situation.

It doesn’t help that she was one of the most trusted advocates in the industry.

Prior to her arrest and suspension, Eva Kaili was one of the EU’s most trusted advocates of cryptocurrencies.

2023 will be a pivotal year for EU cryptocurrencies

Kaili has also been one of the few cryptocurrency advocates on the political left. She was also a senior Member of Parliament, serving as one of fourteen Vice Presidents from January 2022 until she was arrested and charged with corruption in December 2022. Former TV presenter Kaili was also considered one of the most glamorous lawmakers in the continent. Tabloids called her one of the sexiest politicians on the block.

“She was a cheerleader, but already pretty isolated on the left side of the political spectrum,” Dutch socialist Paul Tang told POLITICO. “The next cheerleader has to be squeaky clean if there’s any lesson to be learned from that.”

The coming year will also be crucial for cryptocurrencies, lobbyists and advocates. The Markets in Crypto Assets Regulation (MICA) harmonises the rules for crypto assets across the block, establishing a common standard. During the 12-18 month adjustment period for MICA, the regulation will not fully enter into force before the end of 2024. However, the French financial regulator has already called for stricter rules.

On January 9, Marie-Anne Barbat Layani, president of the country’s Financial Markets Authority (AMF), wants to impose licenses for registered crypto companies. “MFA, like parliament, is calling for an expedited move to a compulsory licensing regime for unregistered providers” of cryptographic services, Barbat-Layani told a event.

France is unlikely to be the last to request similar regulations in the bloc. Calls from within the European Parliament for such a formalization are likely to grow.

Other MEPs have a lot to say about cryptocurrencies

One of the MEPs with the strongest voice in the cryptocurrency sector is Dutch centre-left MEP Paul Tang. He has strongly advocated tighter scrutiny of unhosted (or unsupervised) wallets. In his view, the identity of unhosted wallet owners had to be verified to prevent the money from falling into the hands of criminals.

Tang also pointed to the matching “smurf” as a risk. Smurfing is the practice of dividing a large sum of money into multiple smaller transactions to avoid regulatory scrutiny.

In a Twitter wire in March of last year, he said:

“These are important tools to fight money laundering/terrorism financing. Some crypto-lobbyists won’t like the extra work. But being part of our society comes with obligations. Banks are already fighting criminal money. Crypto-bro’s should get ready for the pot and so should you.

However, last July, Tang and colleagues failed to include non-hosted wallets in money laundering checks. He told CoinDesk at the time that “we cannot focus only on the regulated sector by keeping the backdoor open to large flows of anonymous cryptocurrencies.” Throughout 2022, Tang was frequently subjected to vitriolic abuse by members of the crypto community due to his campaign.

Balancing consumer protection and innovation, say MEPs

An MEP with an arguably more balanced outlook is Lidia Periera, a Portuguese MEP who also comes from the centre-right. Pereira, who is 31, has previously highlighted cryptocurrency’s young user base as a reason to take the industry seriously. Your opinion is that the EU should strike a balance between protecting consumers and maximizing opportunities. She told the Tech A Look video series: “On the one hand, we have to provide investor protection. On the other hand, we have huge potential to exploit innovation in the European market.”

We can’t just be “on one side of the fence,” he said.

Dr. Stefan Berger is another candidate to be the leading crypto voice in parliament. Like Pereira, his views are both moderate and pro-crypto. The German MEP is generally in favor of a balance between clear and fair regulation and the promotion of innovation. He previously blogged about the need for a euro CBDC and that the EU is a crypto-friendly environment.

“A digital euro would complement cash, not replace it,” he said. “Europe must set standards instead of following those of others, and a digital euro would be proof of progress and integration in Europe. In the meantime, the monetary authorities are called upon to rebuild confidence in the financial system”.

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