Back in 2018 we managed to persuade Europe to engage in investments liberalization. The results of that might now be showing in data with VC investment nearly doubling to 18% from 10% of Europe’s global share.
This speaks to a changing wind as what once was seen as a sclerotic Europe, starts becoming more dynamic this decade.
We’ll credit cryptos for that because this inter-disciplinary field has an effect on the general economy both directly and indirectly with the biggest recent change in Europe being what we call a liberal (as in classic) approach towards investments, new digital business models, and capital fundraising.
While captured USA went on a regulatory attack to maintain financial monopolies through legal barriers, Switzerland, then France, then Denmark ditched them altogether.
Switzerland “Should Become the Crypto-Nation” Says Minister, was our January 2018 headline. France “Become Actors in the Crypto Revolution,” Embrace ICOs, Says French Finance Minister, we reported in March of the same year. Denmark Says ICO Not a Security was the headline in 2019.
These developments, especially the latter, went seemingly unnoticed at the time. Yet three or four years on, Europe is becoming a stronghold of sorts for cryptonians, and that means for business in general.
From dYdX giving $1 billion to mostly Europeans, to Germans throwing parties on Decentraland’s metaverse, Europeans are less visible, but also everywhere.
Their decision to make a distinction between traditional securities and token based models means investors in Europe are a lot more comfortable and do not have to face a digital repression that has a lot of US citizens banned or firewalled from many new dapps or projects.
These dapps are exercising a sovereign right to jurisdictional independence. That being the right to operate globally while being subject to EU law. A right that should apply even if US citizens are served as they can be considered similar to visitors. An American in Amsterdam, for example, can weed in a cafe. Him using a defi platform based in Amsterdam can logically be considered as him visiting Amsterdam even though he is still in US physically, but that’s not what US says.
So Americans have to be more subtle while Europeans can operate more openly, potentially leading to a stealth resurgence as the passing headlines gradually change the air.
This is currently more visible in the crypto stock market which is starting to become more dynamic in Europe.
Americans have largely ignored Europe because they have plenty of products to invest in their own stocks, but now they’re learning about the continent as they want actual crypto, but in a stock wrapping.
Once that pipeline is formed, they might look to see what else is around, and they might even think a lot of European stocks are undervalued. That then naturally feeds into the wider economy and so we have a transformation.
The upcoming German government has a classic liberal as finance minister, Christian Lindner, with the coalition more widely deciding to focus on digitization.
This is reason for optimism, although we’re always ready for disappointment, because the last time yellow was in power was in UK in 2014 when the then Chancellor George Osborn bought a bitcoin.
UK was on the up and up back then, until nationalism made a mess. There’s no nationalism threat in Germany, although arguably there is a COMMUNISM one with papers please and ID required for a haircut there now in what is both scary and revolting. But that’s just a state not at the federal level and during Merkel’s watch. The new coalition refused a lockdown, presumably because they already have an eye on the next election when the three parties might run as one with the leaders generally young-ish.
If we had the privilege of giving them advice, especially to Lindner, we’d say take seriously investments liberalization and expand it to be more European wide.
In combination, we’d fund a special unit at the Europol that goes after financial fraud and scams, in particular where capital formation is concerned. If we had our way, we’d even give them criminal prosecution powers to make such fraud or scams very costly for what are effectively thieves.
For the rest we’d provide some general education because startup investing is very risky. 95% will fail and you never know who is Amazon, who is Petshop. Which is why you diversify. If you have €2,000, you give €200 to ten projects and hope one of them 100x-es. If it does, then now you have €20,000 even though 95% failed.
US argues against that because they say there would be hype, there might be a bubble, people might lose their money, but we had the Great Recession and we’ve had busts almost every decade despite these prohibitions.
Investment is risky, but there are potentially huge rewards too because in general someone closest to the problem is best suited to solve it. Nowadays they have to either tap American VCs at a high cost because they are a legally protected monopoly, or the bank which won’t give them anything, or their mom and dad who can only sustain them for so long.
Why not the global public and thus people who might also be aware of the problem, thus want to fund a potential solution to it at a cost no more than some Supreme trainers.
Also that ‘bubble’ in the 1930s gave us electricity, cars, the TV, airplanes and a lot more. The causes of it are complex, including hyperinflation in Germany, with freedom probably not the chief cause.
So Europe should move more towards formalizing this liberalization with it currently more an implicit understanding of sorts that as far as this space is concerned, Europe is free and therefore you can openly innovate.
Even that is enough to change sentiment for the continent in part perhaps because USA is repressive on this matter.
Thus as long as that implicit understanding remains, Europe should become a lot more dynamic because there’s a rising class now with a mission, and they won’t take no.
If they’re welcomed, then Europe might become the center in a decade as the new wave of innovation marches on.
