The right to privacy is enshrined in many legal traditions around the world. In the United States, it’s protected by the Fourth Amendment; in the European Union, it falls under Article 8 of the European Convention for Human Rights. While definitions differ between jurisdictions, most of us have a right to a reasonable expectation of privacy for our correspondence, in our homes and about our persons.
In the 1970s, businesses, families and individuals started generating data like never before, and the degree to which it fell under existing privacy mandates was increasingly unclear. This proliferation of data was first acknowledged as a problem in the late 70s and picked up pace in the decade that followed. In response, the EU introduced its Data Protection Directive in 1995, guaranteeing certain fundamental rights around the processing of personal data.
The crucial thing to understand in this context is that
In Brussels, regulation is also picking up pace. The EU’s Markets in Crypto-Assets (MiCA) comes into force in the fourth quarter of this year and will kick off an 18-month transition period for member states. Meanwhile, the newly published European Financial Stability and Integration Review 2022 showed a laudable understanding of the sector. It advocated for a rethink of the current regulatory approach, centering regulation on activity rather than an entity.
It’s still early when it comes to DeFi. However, digital securities regulation in the EU could well follow a similar path to the one that led to GDPR. Brussels this year issued an opinion on activity-based regulation, which we ultimately might see incorporated into its Markets in Financial Institutes Directive. (A directive, remember, is a guiding recommendation for member states.) From there, it could become regulation as part of MiCAR.
With a real-world example of DeFi regulation to lean on and decentralized finance becoming the technology layer where ultimately the entire financial market will be moving, other regulators will follow. Indeed, jurisdictions like Israel have made a habit of it. The question is whether the U.S. will be most influenced by the “Brussels Effect” or the “California Effect.”
Philipp Pieper is the co-founder of Swarm, a regulated DeFi platform in Germany.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
