What do the EU election results mean for digital assets?

Europe has just elected 702 members of the European Parliament. Some would call voting a great exercise in democracy. Others would call it an opinion poll designed to repurpose domestic politics. The results show that it is a bit of both.

Generally speaking, what Sunday’s results were predicted to be. There were no early elections in France.

The main conclusion is that decisions in the European Parliament will continue to be made by a centrist majority. Together, the center-left Progressive Alliance of Socialists and Democrats (S&D), the center-right European People’s Party (EPP) and the liberal Renew party will have over 410 votes. This is a majority sufficient both to shape policy and to re-elect the current President of the European Commission.

The press reports a shift to the right. This is technically accurate. The far right has secured major victories in the heart of Europe, including Germany, France and Italy. Mainly the Nordic countries and Portugal bucked this trend and gave fewer votes to Eurosceptics than expected.

This signals disruption in our societies, but it is an exaggeration to say that the far right will now decide EU policy. The EU’s largest political group, the EPP, is characterized by a deep ideological divergence from more right-wing parties. Therefore, a formal partnership in the mentioned centrist coalition is much more likely. Until now, it has been a decision-making tool for Parliament and will remain so.

The power of the far right (ECR – European Conservatives and Reformers) and the far right (ID – Identity and Democracy) should not be overestimated, but neither should it be ignored.

In particular, ECR gained 15 seats last night. 14 of them came from the party of Italian Prime Minister Georgia Meloni. She has emerged as a much gentler conservative than her election campaign might have suggested, recognizing the degree of cooperation necessary with both Brussels and Washington to consolidate her power. Nevertheless, formal cooperation with the ECR may be a taboo for mainstream parties. However, cooperation on specific political issues is now possible for the EPP, even if it will only be used as a threat and a negotiating technique in disputes with the center-left.

This includes things like cryptocurrencies. The negotiations are over Mica and AML package, it was often the case that left-wing and right-wing Members of the European Parliament disagreed on how prescriptive and restrictive these rules should be. Weeks of negotiations were spent arguing around it EU travel rules or around the durability of bitcoin.

A few caveats before we consider the new right-wing formation positive for the industry.

First, individual Members of the European Parliament have made a sea change in EU cryptocurrency policy. Their influence combines the ability to operate within their group’s ideology, within the responsibilities assigned to their committee, and a high degree of understanding of the industry. This three-factor is hard to come by and the industry will be lucky if some of these progressive voices return to Brussels.

Secondly, the ECR as a whole, and Prime Minister Meloni’s party specifically, do not have a coherent view on digital assets. Also in the EPP, the power dynamics are shifting between representatives of Poland, Spain and Germany. These are known unknowns.

Finally, the impact of Parliament as an institution must be seen in the context of where we are in the legislative cycle. During the next legislative term, 2024-2029, the MiCA moment will not be on the same scale. Implementation bodies at EU and national level will carry out most of the work over the next two years.

In this sense, President Macron’s calling of early elections in France on Sunday could be important for the digital assets industry. Meanwhile, the European Commission needs to form a view on possible new policy initiatives that still need to be taken in the areas of decentralization, tokenization and staking.

But there’s something bigger than electoral math here.

The digital assets industry is moving too quickly or too slowly towards regulation and compliance. The new European Parliament and the new College of Commissioners will decide whether this road will be bumpy or smooth. However, in the long run, regulatory compliance is not enough for the industry.

These elections are taking place at a key moment in European history. Far-right movements are taking advantage of the continent’s reduced economic growth and high inflation to stir up anti-European sentiments. Elected leaders have prioritized EU competitiveness and the need for more active capital markets.

The digital assets industry still has a long way to go to build trust and credibility. Who they choose to partner with over the next five years will show what the industry represents.

Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc. or its owners and affiliates.