Max Schrems calling the EU a "digital failed state" makes me think about the implications for crypto and compliance. He said the EU's Digital Omnibus package undermines privacy laws, allowing personal data to be used for AI training. If this was just about privacy, I wouldn't even mention it here—but it also offers thoughts for crypto startups on how to navigate compliance. You have to wonder if this could lead to more open and flexible views toward crypto, based on how they frame compliance as detrimental to innovation.
The EU’s Regulations and Crypto Startups
For crypto startups, especially Asian ones targeting users in the EU, the EU's privacy laws come with serious challenges. These laws apply even if the firm is located outside the EU. So if you're an Asian crypto business, and you collect or use personal data from EU residents, those regulations apply to you. That means you have to do things like keep your data local or follow GDPR principles, like data minimization and encryption, from the start.
The immutable nature of blockchain conflicts with EU rights to access and erase personal data. So, companies might need to begin storing data outside the blockchain or design governance frameworks that clarify who’s responsible for what within the blockchain system. Compliance isn't cheap either, with fines up to 4% of total worldwide revenue or €20 million for infractions.
The Case for Stronger Regulations
When it comes to Schrems' perspective on EU enforcement, it’s notably scathing. He believes that the EU is a "digital failed state" because it hasn't enforced its own privacy laws well. That could be problematic in a crypto context. If companies don't know which laws will actually be enforced, how can they plan for compliance? And this potential rollback of regulations—prioritizing competitiveness over privacy—could cause some crypto companies to escape intense scrutiny.
How to Approach GDPR Compliance
Whether it’s with regard to reputation or actual fines, businesses need to take compliance seriously. Here are some ways to do that:
Some best practices for crypto businesses:
- Conduct Data Protection Impact Assessments on new tools and technologies to find data protection risks and ensure they follow GDPR principles.
- Robust Monitoring Systems: Make sure you can spot breaches and report them quickly, ideally within 72 hours.
- Cross-Border Data Transfers: You need to have safeguards in place for sending data outside the EU, like Standard Contractual Clauses.
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Be as Transparent as Possible with EU users to build trust.
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Invest in Regtech and other compliance technology to make it easier to stay within the lines.
What Lies Ahead for Crypto in Europe
With everything in flux, crypto startups have to be alert to the changing regulatory waters. If the EU starts enforcing privacy laws more strictly, it could have a big impact on how crypto companies work. But there could be a silver lining. Startups that embrace compliance and make it part of their business strategy might have a better chance to succeed. Some other areas to watch are crypto payroll and compliance tools.
