What Do the EU Election Results Mean for Digital Assets?

Broadly, Sunday’s outcomes were forecasted. The snap elections in France were not.

In essence, the European Parliament’s decision-making power will be wielded by a coalition of centrist groups, including the Progressive Alliance of Socialists and Democrats (S&D), the European People’s Party (EPP), and Renew. With over 410 votes combined, they possess the necessary clout for legislative initiatives and the ability to re-elect the incumbent President of the European Commission.

As an analyst, I’ve observed a notable swing to the right in European politics based on recent election results. This observation holds true as the far-right parties have achieved significant victories, particularly in Germany, France, and Italy. Contrary to this trend, countries like the Nordics and Portugal have bucked the forecasts and granted fewer votes to eurosceptic groups than anticipated.

There’s a disruption in our societies, but it’s an overstatement to claim that the EU policy will be dictated by the far-right parties. The European People’s Party (EPP), which is the largest political group in the EU, holds significant ideological differences from parties located further to the right. Consequently, they are more inclined towards forming alliances with centrist groups. This coalition has been instrumental in shaping EU parliamentary decisions thus far and will continue to play a pivotal role.

While the influence of the European Conservatives and Reformists (ECR) and Identity and Democracy (ID) groups in the European Parliament shouldn’t be downplayed, it’s also important not to overlook their significance.

Last night, the European Conservatives and Reformists (ECR) group gained 15 new seats. Among them were 14 from the Italian Democratic Centre (IDC), led by Prime Minister Georgia Meloni. Contrary to her campaign image, Meloni has shown a more conciliatory approach towards both Brussels and Washington DC, recognizing the importance of cooperation to solidify her power. However, formally aligning with the ECR could be politically risky for mainstream parties. Nevertheless, policy collaborations are now feasible between the European People’s Party (EPP) and the ECR, even if used as a bargaining chip in disagreements with the center-left.

During the MiCA and AML package discussions, there was frequent debate among MEPs from various ideologies regarding the need for detailed regulations versus maintaining flexibility. Protracted disputes arose over the application of the EU Travel Rule and the environmental sustainability concerns related to crypto-assets like Bitcoin.

Several caveats before we color the new right-wing formation as positive for the industry.

Firstly, individual MEPs have made an outsized difference to EU crypto policy. Their influence combines an ability to operate within the ideology of their group, within the responsibilities given to their committee, and a high degree of understanding of the industry. This tri-factor is hard to come by, and the industry will be fortunate to see some of these progressive voices return to Brussels.

Regarding digital assets, both the European Conservatives and Reformists (ECR) as a group and Prime Minister Meloni’s party specifically have yet to establish a clear-cut position. Inside the European People’s Party (EPP), there is a shifting balance of power among representatives from Poland, Spain, and Germany, adding to the uncertainty. These are factors that remain unclear but are expected to impact the situation.

In the final analysis, it’s important to keep in mind the role of Parliament as an institution when evaluating our current legislative process. During the upcoming legislative term from 2024 to 2029, significant events similar to MiCA (Markets in Crypto-Assets Regulation) may not occur. Instead, the European Union and national authorities will be responsible for implementing most of the regulations during the initial stages of this period.

As an analyst, I would say that President Macron’s decision to call snap elections in France this coming Sunday could potentially have significant implications for the digital assets industry. Simultaneously, it is crucial for the European Commission to evaluate whether any additional policy initiatives are necessary regarding decentralization, tokenization, and staking.

But there is something bigger here than election math.

The digital assets sector is moving either too swiftly or too gradually towards regulatory oversight. The newly elected European Parliament and Commissioners have the power to make this journey more turbulent or seamless. However, mere compliance is insufficient for the industry’s future success.

At this significant point in European history, the upcoming elections take on added importance due to the resurgence of far-right forces. Leveraging Europe’s economic downturn and high inflation, these movements aim to stoke anti-European sentiments. Meanwhile, newly elected leaders are prioritizing EU competitiveness and a more dynamic role for capital markets within the European Union.

As a researcher studying the digital assets industry, I have observed that building trust and credibility is a significant challenge we face. The next five years will be crucial in determining which partnerships and associations the industry embraces. Our choices during this period will speak volumes about who we are and what we represent.

As a researcher, I’d like to emphasize that the perspectives presented in this article are my own, and they may not align with those held by CoinDesk, Inc., its proprietors, or their affiliated entities.