While we are counting down to July 1st, the final deadline for the European Union's landmark markets and crypto assets regulation.
MA does replace a fragmented patchwork of national laws with a single 27-state passport, but the runway has officially run out and according to the European Securities and Markets Authority, out of more than 1200 registered crypto firms across the EU, fewer than 210 have successfully secured their full licenses.
And this consolidation is pushing smaller players toward authorized institutional giants.
So joining us now to discuss what this actually means is Mike Belshe, CEO and co-founder of Bitco.
Mike, good morning.
Happy Monday.
Thank you so much for joining us.
Well, we are less than 48 hours away from that July 1st MA deadline.
So is the market actually ready for this?
And what are your expectations as we head into the second half of 2026?
Thanks Remy.
Look, Mika's a big milestone because Europe finally has a single rulebook that matters because institutions don't have to come into the markets without regulatory clarity.
So, uh, obviously this has been in the works for quite some time.
What's happening this week is that finally it's actually required.
You have to have it now.
You can't.
Uh, you can't delay any longer.
On the BIO side, you know, we've been preparing for this for, I think, years at this point is, it is fair to say, say.
So, uh, but with that, you know, look, the dangers that people sometimes think like, hey, if it's regulated, it's safe.
In reality, you know, regulation defines the system, but it doesn't harden it.
So, you need players that not only have the regulation, but have also been doing it for years.
And so as it scales, the question becomes whether we've built, not, not whether we've built resilience or whether we've just created a few choke points that everything depends on.
So, good news, the banks are here.
Banks are in a strong position.
Anybody that's looking to move into, into Europe, there's a number of places to go.
And so even though, you know, Mika gives clarity, uh, clarity doesn't stop a system from being fragile when it comes to pressure.
Yes, and Mike, I do want to expand on this when it comes to stable coins.
Mika does mandate that stablecoin issuers must back their tokens with reserves, a massive portion of which must be held as deposits.
So what do you make of this and what more needs to happen here?
Well, stablecoins will be the safest form of deposit for most people.
They're 1 to 1 backed, so they're a very easy thing to manage.
When you look at banking regulation, there's kind of a couple of different parts.
One is, you know, the operational risk, the financial measurement and verification risk, etc.
Those are pretty well understood.
The biggest complexity of banking comes more in the safety and soundness when you are an on-demand deposit. depository institution.
What that means is those are folks that take money from depositors, will go and lend it out, but also still have an obligation to pay back those depositors at a moment's notice.
So, stablecoins don't fundamentally have that problem, and therefore stablecoins will not have the risk.
I know that there's some traditional banks that They are worried that somehow this is going to create a new risk.
It really doesn't.
They have not been able to identify a single risk that's really there other than to say that somehow this is going to lock up liquidity.
We've seen this type of movie before where you have a new innovative product where they say, hey, it's going to take away my deposits.
We saw this in the 1970s with Uh, money markets that were backed by T-belts, it simply never come true, and frankly, I'm a big market believer.
Markets have a fantastic way of adapting to these things.
It won't be an issue.
So stablecoins are actually just purely good, and, uh, you know, basically the systems are working through it right now.
Yes, and Mike, you just mentioned a key word there, and that is liquidity.
So I do want to expand on this when it comes to liquidity as well as rails.
What did the USDC Silicon Valley Bank incident actually teach us here in the US about reserve risks that potentially European regulators may be ignoring right now?
It's a fantastic point.
So for those that aren't aware, you know, USDC a couple of years ago had, I think, somewhere in the neighborhood of $3 billion at a traditional depository institution.
And that depository institution failed on the thing I was just talking about its safety and soundness.
That was Silicon Valley Bank, and basically they had locked their money up into 10-year T-bills.
And when the depositors came and said, on demand, I want my money back, they could not fulfill those obligations.
And so as a result of that, there was a question as to whether, you know, USDC would be safe through that period.
Now USDC, had it not been using Depository banks that lent out the money would not have been subject to this problem at all.
And in, in Europe, there's some debate that, hey, instead of backing these products by T-bills, which of course are cash, and you can do short duration T-bills that are very quickly releasable, um, but they instead want to put it at depositories and.
Depositories will always have the safety and soundness issue just like Silicon Valley Bank did and actually make stablecoins more risky.
So the riskiest part of the stablecoin is the depository bank, and unfortunately, the depository banks, and this is the big guys, they're all saying, hey, you got to put it with us in order to be safer.
Simply not true.
And as we head into the second half of 2026, Mike, I think it goes without saying that the industry is maturing and the architecture behind digital assets is also shifting.
And why do you think reserve design as well as custody will become one of the most contested policy debates when it comes to the crypto market?
Well, a lot of our banking infrastructure, a lot of our market structure was designed 100+ years ago without a benefit of this little thing called a computer.
Um, of course, we are well versed in computers.
We have the ability to settle things electronically.
We've seen massive shifts happen over the years.
It used to be, you know, mortgages were largely fulfilled at your bank.
You'd go to your bank, they would underwrite the loan, they would know who you are, they would.
Actually issue the loan directly and maintain that loan over time.
Today, you go into your bank, and you know, by the time you're out the door, they have repackaged that up to Wall Street into a securitized product, which is highly liquid for the, for the investors to be able to move around in a, in a much better way.
And the bank has sold it.
So the bank does the job of kind of taking your ID and doing the paperwork, and they instantly sell it to Wall Street.
That manages it.
So the idea that you need banks for lending is simply an antiquated idea.
Now, is it still used?
Of course it is.
And do banks have a, have a key role?
Of course they do.
However, the way we think about banks in terms of a coupling of the deposits from retail to the lending to institutions, that doesn't have to exist in the same way as it used to.
We can de-risk this, and I know people are scared of it.
There's been so many.
Depository bank failures in the past.
All of a sudden with computers, the, the advent of, or not the advent, but the re-emergence of reserve banks and custodial banks, trust banks, these are all the same thing.
These are banks that instead of lending out your assets, they hold on to them.
So the risk is fundamentally smaller with the Reserve Bank and always has been.
In the past, people didn't want to use them because you had to pay for them.
These days there's ways to make money because we're able to move the money around via via via computers that we no longer have the same obstacles.
So you can actually have a fantastic depository bank, yet you didn't have to take the same types of risks.
And Mike, finally, before I let you go, of course we're paying attention to how the reaction will fold when it comes to Micah's first real market stress test, but we are also heading into the second half of 2026, and the first half has been quite volatile for crypto and you're coming off the Bitcoin for corporations event this past weekend.
So what is your outlook as we head into the second half?
Well, look, there's still a little bit of, a bit of malaise, I think, over the crypto markets.
I think all focus still remains on AI, so it's kind of distracted a lot of investors kind of toward it.
I think on the crypto side, frankly, there's still a lot of building to be done.
The promises that we've had now for the better part of a decade are still in progress, and we've promised, you know, fewer middlemen.
We've promised better banking, banking the unbanked.
And yet a lot of these things are still, still coming to fruition.
Now there's really good news.
I'm not trying to say that it hasn't happened sufficiently.
These things take time.
Stablecoins are a fantastic example of this, where, you know, they've really only been on the forefront for a couple of years and they're just starting to take root.
And then lastly, you know, tokenized equities for 2026 is really probably the biggest tale.
We've got, I think, about a half a dozen different models all moving forward.
We've got the DTCC itself.
If you're not familiar, the DTCC holds 85% of all US equities land there, and of course all the tradable ones land there.
So it's a king kingpin to the existing system.
It's moving digital as well.
This is going to change the way crypto is used, not just.
Uh, in the crypto markets, but globally.
So it's, it's going to be an exciting, uh, remainder of 2026 in spite of everybody looking over at AI during that time period.
Well, a lot to keep our eyes on, Mike.
So thank you so much for joining us this morning and have a great holiday weekend.
