For its sponsors, cryptocurrency assets offer a liberating and egalitarian alternative to conventional finance, allowing ordinary people to take control of their finances away from the big banks.
But this rhetoric is hitting a harsh political reality of recent times: widespread fear of cryptography among left-wing politicians. And it is causing new political flaws to open up in the never-ending debate over the merits of the crypto.
In the EU, this division has become more pronounced in the European Parliament, which has debated several bills on how to regulate cryptography. Many Conservative MEPs are accusing their opponents of politicizing a technology they think should be fed, not suffocated.
“The left hates Bitcoin because it can’t control it,” wrote German Conservative Stefan Berger after rejecting an offer from the Greens and the Socialists and Democrats (S&D) to remove cryptographic assets, such as bitcoin, that run on energy-intensive software. The fact that “cryptographic values are determined by supply and demand is a thorn in the side of the left,” he opined.
“Some groups in the European Parliament have … a dogmatic agenda against bitcoin and are using excuses to ban Bitcoin and cryptocurrencies,” said Pascal Gauthier, CEO of Ledger, a company that offers a USB-type digital wallet for people can keep them. cryptocurrencies out of exchanges. “Citizens of Europe are represented [they should know] in fact, the vast majority … are against it “.
Not so fast, say left-wing lawmakers. It’s not so much hate, but distrust.
“We are concerned about the public and collective good,” said S&D Dutch MEP Paul Tang, citing his concern about misleading advertising, money laundering and simply greed. Instead, the right believes that “if it’s good for the economy, it’s good for us,” he added.
Parliament’s debate has heated up in recent months, with some MEPs landing in the spotlight of the industry and provoking online abuse after citing the energy consumption of the cryptocurrency and the secret internal operation.
At stake are two bills in the last round of legislative negotiations with EU capital. The first will set investor guarantees and transparency standards for the European cryptocurrency market, called MiCA. The second, known as the travel rule, aims to prevent illicit financiers from using the cryptocurrency market as a launderer. The rules will have a long-standing impact on the growing blockchain cryptocurrency market and could be used as a model elsewhere in the world.
In the US U. Democrats like Sen. Elizabeth Warren are pushing to crack down on the cryptocurrency’s carbon footprint and have warned platforms to tighten their grip on possible crackdowns on Russian sanctions. And progressives see top regulator Gary Gensler, the head of the Securities and Exchange Commission, as one of them when it comes to a tougher approach.
On the other hand are Republicans like Senator Ted Cruz, who has welcome bitcoin in its Texas state and is adamant that cryptocurrency assets will bring “huge opportunities” and “huge amounts of wealth.” More broadly, the party has been oscillating against Gensler’s efforts to regulate the industry more closely.
Crypto exposed the fundamental difference in economic beliefs between the two sides, according to Thierry Philipponnat, chief economist at Finance Watch, a Brussels-based NGO, who points to the profound influence of libertarianism. The origins of the market stem from bitcoin’s commitment to creating a decentralized alternative to the financial industry and government oversight. Decentralization is a natural adjustment to right-wing market policies, in contrast to the left’s preference for the social economy, he says.
“Crypto means‘ hidden ’in Greek,” he said. “It’s that libertarian culture, which is a distrust of state and sovereign entities.”
By the way, there are nuances beyond the left-right division. Personal politics, character, and age also play a role, and there are signs that political views among some on the left are changing. This change is underway in Washington, where many younger progressives are embracing the early scene of cryptography. Those Democrats are now rejecting regulations that could stifle industry.
Then there’s New York City Mayor Eric Adams, a staunch sponsor of cryptography who committed to take your first three paychecks in bitcoins.
More fundamentally, cryptography offers many functions that the left can lag behind, according to Robert Kopitsch, Blockchain’s secretary general for Europe.
“It allows for wider financial inclusion, more sustainable and transparent financial systems, and ultimately ownership of your own data and identity as well,” he said. “Left-wing parties should love cryptography.”
These internal divisions are also taking place in Brussels, as MEPs weigh in on how far regulation should go.
Fighting climate change
The first political struggle in Brussels arose in March over the crypt’s carbon footprint.
Most cryptographic assets, including bitcoin, require massive amounts of electricity to run specialized computers that process and record transactions in a decentralized online ledger, known as a blockchain. The Bitcoin blockchain, for example, uses more electricity than Poland, prompting calls from regulators and central bankers to ban the so-called Proof-of-Work (PoW) blockchain.
The Spanish Ernest Urtasun and the Finnish Eero Heinäluoma, from the Greens and the S&D, respectively, took on the fight to phase out the PoW of Europe through MiCA. His amendment fell short by a margin of seven votes in the final count for MiCA in the 60-member Parliamentary Economic Committee (ECON).
It was not just the right that made the result happy. Greek S&D MEP Eva Kaili described the vote Twitter as a victory for technology neutrality and innovation. Meanwhile, Patrick Breyer, who is affiliated with the Greens but comes from Germany’s Pirate Party, downplayed the cryptocurrency’s energy consumption, saying it “is only a fraction of what the banking sector consumes.”
For Czech Liberal MEP Ondřej Kovařík, the issue was not so much that the Urtasun and Heinäluoma amendments were aimed at climate change. It was that he needed to “be aware of the responsibility we have to come up with viable rules” – and the measure as it is written did not offer them.
Fighting dirty money
The second battle, this time over the Rule of Travel, followed a few weeks later.
Urtasun has allied with Belgian Assita Kanko of European conservatives and reformists to guide the measure through Parliament. It requires companies to check who sends funds, of any amount, in the form of cryptocurrencies and who receives them.
S&D has tightened those rules by requiring additional identity checks on people who use digital wallets who hold cryptocurrencies out of their wallets. These so-called safe wallets are designed to protect against hackers and provide users with a high degree of anonymity. That is a problem for many on the left, who fear that criminals could exploit that function.
The vote approved the committee despite opposition from the center-right European People’s Party, Parliament’s largest political group, and quickly sparked a stir from crypto companies. The changes represented an invasion of privacy and would paralyze the future European market for the Internet of Things, the busy industry. Checks would also make it very difficult for people to donate funds through encryption to teams like WikiLeaks or to support Kremlin critic Alexei Navalny, said Patrick Breyer of the Greens.
Then the divisions between the S&D and the Greens resurfaced. Kaili called for more proportionate rules, while Breyer questioned whether additional controls are really needed for a market whose illicit activity pales in comparison to the traditional financial sector. Other Greens, such as Gwendoline Delbos-Corfield, have criticized some left-wing colleagues for refusing to meet with crypto lobbies while despising MEPs who do.
“I had colleagues saying you’re being influenced,” Delbos-Corfield said. “It simply came to our notice then [what] is crypto doing when others have been doing it for decades? “
Despite all the political fireworks, these changes may not survive the final stretch of talks between Parliament and EU capitals. To cover their bets, crypto companies have stepped up their last-minute lobbying campaigns and are looking to strengthen industry representation, more broadly, in Brussels.
Binance, the world’s largest cryptocurrency exchange, is hiring boots on the ground and there’s a lot of room for growth. The EU Transparency Register, a database that lists lobbying organizations in Brussels, lists only a handful of associations and representatives of cryptographic companies, which together spend up to € 650,000 a year on lobbying. This still pales in comparison to the estimated $ 9 million spent by the industry in Washington last year.
Cryptographic lobbies are confident that they will be able to make EU Treasury officials listen when legislative negotiations between Parliament and EU capitals reach their climax this summer. National representatives have already rejected MEPs’ demands that additional checks be carried out on wallets without custody, for example.
MiCA negotiations could be extended beyond the summer amid deeper disagreements between the two EU institutions over how best to monitor cryptographic assets. But discussions with lawmakers should be made easier over time, according to Blockchain for Europe’s Kopitsch, as a new generation of lawmakers emerges in the world of EU politics.
“The younger the politicians, the more open they are to new technologies like crypto,” he said. Meanwhile, “we want to welcome the silver foxes to the table and try the crypto.”
Zach Warmbrodt helped report from Washington.