Central, Northern, and Western Europe (CNWE) are rapidly adopting crypto, especially DeFi, thanks to supportive regulations and institutional interest.
Central, Northern, and Western Europe (CNWE) takes the silver medal for being the world’s second-largest crypto economy, trailing only North America. Within a year, from July 2022 to June 2023, the region saw $1 trillion in on-chain value and made up 17.6% of global crypto transactions. Notably, Decentralized Finance (DeFi) leads the charge, contributing to more than half of the crypto value received in the region, according to a recent report by Chainalysis.
Regulatory Climate Warms to Web3 and DeFi
Government frameworks across CNWE increasingly favor DeFi and other web3 initiatives. The change is especially visible when examining crypto inflows to centralized and decentralized exchanges over the last year. Despite reductions in 21 countries, Albania, Luxembourg, Latvia, Spain, the United Kingdom, France, and Lithuania saw increased inflows to DeFi platforms. It’s worth mentioning that Albania and Luxembourg, despite their smaller transaction volumes, lead in DeFi activity growth.
Six CNWE nations feature among the top 50 global grassroots adopters of crypto. These countries are the United Kingdom, Spain, France, Germany, Italy, and the Netherlands. Their growing involvement in the crypto sphere underscores the region’s general upward trajectory.
Spotlight on the United Kingdom
The United Kingdom commands attention as CNWE’s largest crypto economy. It ranks 14th globally for grassroots adoption and third worldwide for transaction volume, having received $252.1 billion in the past year alone. Consumers and institutions alike in the UK are diversifying their investment portfolios with crypto assets.
The Financial Services and Markets Bill, enacted in June 2023, integrates crypto assets into existing financial legislation. Despite uncertainties, the bill’s passing has not put a damper on UK’s crypto activity. In fact, the law has led to shifts in stablecoin transaction volume, sparking positive reactions from significant venture capital firms like Andreessen Horowitz.
The Regulatory Imprint: MiCA and EU’s Crypto Ascent
In June 2023, the European Union ratified the Markets in Crypto-Assets (MiCA) Regulation. Set to take effect in mid-2024, MiCA establishes a single licensing system for crypto activities across EU countries. The regulation has already started to shape a more favorable environment for crypto innovation in several member states.
France’s financial market regulator, the Autorité des Marchés Financiers, welcomed MiCA and immediately began working on supportive technical standards for the crypto industry. The country has a history of pro-crypto regulation, as evidenced by its PACTE Act in 2019. Paris, France’s capital, serves as a flourishing hub for crypto activities and has attracted key players like Binance, Crypto.com, and Circle. France ranks fourth in the region for raw crypto value received, signaling its considerable presence in the DeFi sector.
Italy is catching up in the crypto game, thanks to initiatives like the FinTech Milano Hub. Collaboration between the public and private sectors fosters innovations in blockchain technology and DeFi applications. Germany, on the other hand, already boasts strong technical underpinnings for crypto adoption, with more full nodes for Bitcoin than any country outside the U.S.
Germany also recently passed the Future Financing Act, aimed at protecting crypto asset custody. Subsequent institutional activities include Deutsche Bank’s foray into crypto custody and Boerse Stuttgart Digital’s development of an insured crypto staking service.
Industry leaders in CNWE anticipate a wealth of opportunities and challenges in the realms of smart contracts, NFTs, and DeFi. Regulatory frameworks like MiCA will continue to shape the landscape, though much work remains in harmonizing regulations across Europe.