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EP71: Ask the Owl, Ep 2: Midyear Crypto Policy Update 2026
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This episode offers a 2026 midyear global check-in on crypto policy and focuses on where the conversation is gaining real momentum. It covers tokenization, the US legislative moment around the Clarity Act and stablecoin rule-making, the MiCA review process in Europe, and the continued importance of keeping infrastructure providers out of intermediary categories that do not fit what they do. Taken together, these issues offer a useful snapshot of how the policy landscape is shifting across major jurisdictions. Stay updated and get even more details in our policy comment letters.
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Transcript
Introduction to Policy Layer Podcast
00:00:06
Speaker
Welcome to the Policy Layer, where we talk about the real decisions shaping crypto, tech, and the future of trust. I am Silvia Sanchez, your host from the Avalanche Policy Coalition. We aim to bridge the gap between the builders of Web3 and the people that are shaping the rules. On our podcast, you'll hear from policymakers, developers, academics, and others working at the edge of tech and regulation.
Introduction to 'Ask the Owl' Series
00:00:32
Speaker
We ask the questions that everyone's actually wondering and we keep it easy to follow. This is the Policy Layer.
00:00:43
Speaker
All right, welcome back everybody to Ask the Owl, our recurring series from the Policy Layer where we take the questions people ask or are wondering about blockchain, crypto and digital policy and answer them.
Global Shift in Crypto Policy Focus
00:00:56
Speaker
I'm Sylvia and today I'm back with the master owl himself, Lee Schneider, our general counsel at Ava Labs.
00:01:02
Speaker
And this is our second episode, and this one won't be so on the technical side, but more on the policy scene, because there has been a lot going on in crypto policy around the world, and it felt like the right moment to do this global mid-year check-in, seeing what's changed, where the biggest pressure points are, and also what lawmakers and regulators seem to be getting more serious about, and also what people building in this space should actually be watching when it comes to crypto policy. So, Lee, welcome back.
00:01:31
Speaker
Thank you, Sylvia. Great to be here. Great. So let's start with the big picture and then work our way into the specific pressure points. So if you have to describe the global crypto policy mood as of right now, mid 2026, what feels most different from this time last year?
00:01:49
Speaker
oh Well, I would say the biggest thing that feels different from this time last year is the focus on tokenization of assets. I think we're seeing that across many jurisdictions. And frankly, I'm very glad
Tokenization as a Blockchain Use Case
00:02:01
Speaker
to see that. I think there's a lot to be done on tokenization of assets.
00:02:06
Speaker
It dovetails nicely with our focus on token classification, our focus on the nature of the activity and how important the nature of the activity is in the sort of intermediary versus infrastructure debate.
00:02:21
Speaker
So it really highlights a lot of those issues as we're starting to see traditional assets being brought on-chain. And would you say that we're looking at a more mature phase or just a more crowded one, a mix of both?
00:02:36
Speaker
Yeah, definitely a more mature phase. And, you know, many people in the blockchain world, I think, believe that this is the real use case for blockchain is tokenization of assets. And so as we see tokenization of assets, lots of different assets, by the way, it's not just financial instruments. it's Things like real estate, card titles, event tickets, all kinds of stuff is getting tokenized.
00:03:02
Speaker
As we see all of those things happening, um it it does seem to indicate that this is the the killer use case for blockchain. um And it should result in greater efficiencies, greater global ah access and global business models ah for any kind of asset I agree. And I think that's also a very big goal.
00:03:27
Speaker
big grabbing point in the sense that it goes beyond things like token prices or what you can do or what's trendy and because these things can come and go but when it comes to the real value to tokenizing pretty much anything on on the blockchain i think that once you zoom out like that you can also start to see that some jurisdictions are embracing this and moving much faster than others and but perhaps not always in the same direction so this is kind of like the next point that i'd like us to get at When you look across jurisdictions and at the moment, where do you see the clearest policy momentum and where does it still feel like the conversation is ahead of the system or maybe where a bit more work could
UK and US Regulatory Efforts
00:04:10
Speaker
be done? And I know that there's a lot of jurisdictions to try to just pack into this specific question, but just at a glance, what would your picks be?
00:04:19
Speaker
It's a tough question to answer because different jurisdictions are sort of grappling with with different, even if they're related, issues. ah The UK comes to mind. They've been on a tear over the last ah certainly over the last six months. but really over the last 12 to 18 months of really trying to figure out what the regulation of blockchain and crypto looks like. And that includes tokenization of assets.
00:04:45
Speaker
you know, we just filed that comment letter in response to the call for input from the FCA and the Bank of England. um And a month before that, we filed another comment letter with just the FCA and in response to their consultation on the regulatory perimeter. And so ah a lot of these issues are coming to the head there.
00:05:07
Speaker
Here in the U.S., obviously, we're trying to hope that Congress will pass the Clarity Act, but it looks like the SEC and the CFTC are poised to act through rulemaking and maybe exemptive relief ah if Clarity Act doesn't pass right away.
00:05:26
Speaker
And as you know, that's something we've been arguing for
Asian Crypto Regulations
00:05:29
Speaker
for over a year now in our comment letters to both the SEC and the CFTC. When we look at Europe, obviously it's ah time for the MICA consultation, right? MICA has been in effect for some time now and um the European Commission put out their consultation on MICA.
00:05:51
Speaker
ah The deadline for that is September 30th and we'll be writing a comment letter in response to that or a submission in response to that. um And then when we look ah over at Asia, you know, Japan, lots of people forget that Japan was the first major jurisdiction with comprehensive crypto asset regulation.
00:06:15
Speaker
they've had it now for over 10 years the spring of 2016 was when they first adopted comprehensive crypto asset regulation and the japanese the jfsa has been very diligent about keeping up with developments in the industry keeping up with developments across a broad swath of things not just crypto but stable coins tokenization of assets And now they're in the the midst of of moving um to a consolidated regulatory scheme in Japan
00:06:51
Speaker
for ah ah and under the financial services regulator, which many people would argue ah that's where it
Progress in Stablecoin Regulation
00:07:00
Speaker
belongs. um So we're really seeing a lot there.
00:07:04
Speaker
Hong Kong is finalizing their stuff. Singapore has generally been ahead of the curve, like Japan, not quite as as quick as Japan, but still very advanced in their regulatory frameworks.
00:07:17
Speaker
um South Korea is working on on stuff as well. um And then a variety of other jurisdictions have things going on in Asia, too. so And then we look to South America, and we see, again,
00:07:32
Speaker
So jurisdictions like Brazil and Argentina working through crypto asset regulation and sort of what all of that looks like, thinking about stable coins and stable coin regulation.
00:07:44
Speaker
So there's really a lot going on around the world to the point where I certainly can't keep up with all of it. Definitely, and I think that was a really good um sampler because again, there's so much happening, many different approaches.
00:07:58
Speaker
um But now let's just go over specific jurisdictions at a deeper level. And let's start with the US. um There specifically, as you mentioned, everything that's happening around will the Clarity Act pass, will it not? We're still in a moment where market structure and stablecoin policy are being negotiated in parallel. We have the Senate banking and agriculture pieces carrying a lot of weight. And again, we've seen that um even with a different administration and what's happening in Congress, but from your perspective, what is the real significance of this stage in the process? Why is this phase really important? Even though sometimes it might seem a bit delayed and uncertain, why should people care before the final text is done?
00:08:45
Speaker
I think it's a really good question, Sylvia. As we saw with the Genius Act related to stablecoins, that's really kickstarted a whole bunch of activity in the stablecoin space.
00:08:56
Speaker
And in particular, we now have all of these proposed rulemakings out from the banking regulators, from some of the state regulators who will ah cover stablecoin issuers. And so we're really starting to see the stablecoin regulation regulatory regime build out And that's going to allow stablecoin issuers to really know where they stand and be able to make decisions about what they're doing and how they're doing it in the US.
00:09:25
Speaker
I think that's the model that we all hope for with Clarity Act as well. right And the Clarity Act would cover sort of the broader swath of crypto assets.
00:09:36
Speaker
you know, network tokens or protocol tokens, as we call them, right, the token that's integral to the functioning of the protocol. The regulatory a situation for those has been uncertain for many, many years in the US.
00:09:53
Speaker
The whole Howey test investment contract stuff has people constantly confused about what it is that they're doing and how they should be conducting themselves. So the hope is that clarity will come in and as with genius, will set the stage for the rulemakings and the rules of the road that everyone will follow for new token issuances.
00:10:18
Speaker
So that's why it's so important.
Clarifying Roles in Crypto Regulation
00:10:20
Speaker
ah ah As you know, we have argued for the better part of a year now that the SEC and the CFTC can get going with rulemaking already.
00:10:32
Speaker
um And we've argued that for two reasons. One, we think there's a lot of that is already within the SEC and CFTC's jurisdiction based on their statutes, etc.
00:10:46
Speaker
But two, even after clarity passes, There's a ton of rulemaking that is required of both agencies by clarity.
00:10:56
Speaker
So the Senate banking side and and the draft there requires that the SEC conduct a whole host of rulemakings about a whole host of issues, including disclosure requirements and the applicability of broker-dealer and other regulations to different actors in crypto.
00:11:18
Speaker
The same is true on the Senate Agriculture Committee side for the CFTC. So the the Senate Ag half of the bill also calls for a whole bunch of rulemakings by the CFTC, again, to clarify the secondary trading markets and who is required to register and be regulated, etc., etc.
00:11:40
Speaker
so um um Our view has been, look the SEC and CFTC may as well start proposing those regulations because they know the general scope of what they're going to be required to do under these rulemakings.
00:11:57
Speaker
And at least if they get the proposals out there, they can then adjust them if Clarity Act passes, when Clarity Act passes. But if it doesn't pass, which... you know Right now, if you look at Polymarket, it's basically a 50-50 chance of passage.
00:12:14
Speaker
If it doesn't pass, then they've gotten a head start on all the work. And I also think that tied to those points, there's a distinction that here at the Avalanche Policy Coalition we've been advocating for consistently that really feels central right now is the issue of infrastructure versus intermediary. and Again, very specific to the U.S. side, but we also did a comment letter to Australia last year on this. And I think that... It's a very salient point to continue and honing in because we have to make sure that infrastructure providers are not regulated as intermediaries. So just as a refresher, why is that distinction so important right now, but especially in the U.S.?
00:12:57
Speaker
So i I don't think it's especially
Public Blockchain Evaluation Framework
00:12:59
Speaker
important in the U.S. I think it's especially important everywhere. um But no, you're absolutely right that as clarity is making its way through the Senate, we do. It is especially important to make sure that that infrastructure versus intermediary divide is retained, because what we don't want to have happen is Congress, either intentionally or accidentally, washes away you know, decades of rules that infrastructure providers are not regulated.
00:13:32
Speaker
ah As and this is the point we made in in our ah ah comments, comment letters ah last year to Australia, Hong Kong, the US, as well as these two recent comment letters in the UK is that's been the way financial services regulation has worked for decades.
00:13:55
Speaker
The infrastructure providers, the cloud providers, the the communications network providers, etc., etc., they are not regulated entities. The Internet, which everybody relies on for all kinds of financial services these days, is not regulated.
00:14:14
Speaker
What is regulated are the folks who are actually functioning as intermediaries or other types of regulated entities. And when they use the Internet, the cloud providers, the communications network providers, and nowadays public blockchains, et cetera, they are using that infrastructure and they apply the outsourcing infrastructure and resiliency principles, operational resiliency principles, ah to their activities using those
00:14:49
Speaker
using that infrastructure. And so for us, that's an absolutely critical point. And just one other quick quick point here.
00:15:01
Speaker
We've been working with the Global Blockchain Business Council's a Risk Mitigation Framework project, which we think is a really important project.
00:15:12
Speaker
The GBBC with Oliver Wyman and you know a whole bunch of participants, including us, ah have has been working on a model framework for financial services companies to use when they're evaluating the risk of using public blockchains, ah when they're applying their outsourcing and operational resiliency
EU's NICA Review and Consultation
00:15:38
Speaker
principles there. So I would encourage people to take a look at the GBBC's framework. It's a work in progress um and
00:15:46
Speaker
ah comments are are welcome, ah but it gives people a general idea of how this should look and what's possible here.
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Speaker
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Speaker
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00:16:55
Speaker
Yes, and on that point of the GBBC risk mitigation framework and to our listeners, you can also stay updated both on our social media, on the GBBC social media where we post updates, and then we also encourage feedback, as Lee said. And while the U.S. s is still in a very much active legislative phase, Europe is in a different place. and The rules are there, and now the review and the implementation questions are starting to bite a bit more.
Tensions in European Tokenized Asset Regulation
00:17:23
Speaker
So on the EU side, the Commission opened its NICA review consultations in late May, and they run through the end of August. Actually, end of September now. They just they just extended it. Okay, there we go. So another month for more feedback and we will do a comment letter. We'll show more feedback and more detail in the coming the coming weeks here this summer. But also, if we can get just a little a kind of sneak peek or preview into implementation feedback, what Europe is learning from first application, what might need adjustment, what could you tell us on that?
00:17:57
Speaker
Sure. So we will focus on the infrastructure point in our comments, and it will dovetail, I think, quite nicely with the things that we've been saying for for quite some time now, including the input that we just gave to ah the UK authorities.
00:18:15
Speaker
ah in response to their call for input. um So that's going to be the major focus, focal point of our submission. ah One of the other interesting questions from my perspective that's posed ah by the the consultation is whether or not ah Mika gets the definitions of crypto assets right. And, you know, there's there's basically, there's asset reference tokens and e-money tokens, both of which are forms of stable coins.
00:18:51
Speaker
um And then then then there's other ah a couple other categories. um And so one of the interesting questions is, you know, should Mika be broadened to encompass more than just crypto uh should it also encompass other assets that get tokenized other financial instruments that get tokenized and that's some tension between mika and method the market and financial instruments directive that's been in place in in Europe for quite some time now.
00:19:28
Speaker
ah And that tension is interesting because it raises the question of whether or not when you tokenize an asset, you want to have a different regulatory regime apply.
00:19:40
Speaker
Now, we've argued, no, you don't want a different regulatory regime. That's too confusing for everybody. And and that will be our feedback again. But, you know, you can certainly see a world where it makes sense to ah bring the two, Mika and Mifid, closer together or even combine them so that they govern all these different types of financial instruments rather than just having completely different sets of rules for these for these different types of financial instruments.
Comparing US and EU Regulatory Approaches
00:20:19
Speaker
So that's going to be a very interesting discussion and debate in europe i don't think we're going to weigh in on that i don't think that we have strong opinions on which way it should be but it is it it is it does raise interesting questions uh about how to think about regulation here Definitely. And I think that regardless of the path that Europe takes of just having one framework or multiple frameworks, it still creates an interesting contrast with the U.S. because Europe, I think the main challenge is is not can we get a framework, but more, oh, what does this framework look like once it already is breathing in the real world? and
00:21:01
Speaker
So where would you see the sharpest contrast? and Is it in speed and philosophy and institutional design or in how each side thinks about risk, going back to this risk point that you made earlier?
00:21:12
Speaker
I think that's a really good question, Sylvia. um We should get Peter Kerstins from ah the European Commission on the show, and then you should pose that question to him and see what he thinks about it.
00:21:26
Speaker
um You know, ah i i do think we have argued that regulation needs to be technology neutral, and I think that concept ah is something that most people generally agree with.
00:21:41
Speaker
That said, um when the technology ah pushes the boundaries of what's possible, whether it's in terms of speed, whether it's in terms of you know tokenization, allowing individuals to hold their own instruments and not have to use an intermediary, excuse me, hold and trade those instruments,
00:22:07
Speaker
without an intermediary, um when it allows for when when it's public infrastructure like like public blockchains are, that allow ah for anybody to interact with it and and be creative on on the technology or with the technology.
Regulatory Re-evaluation Due to New Tech
00:22:27
Speaker
you know There are important questions that that can be re-evaluated. And so ah if the European Commission is taking this opportunity to re-evaluate those questions, I think that would be very useful. By the way, I commend the SEC and the CFTC here in the U.S. because they are using this time now as an opportunity to re-evaluate
00:22:56
Speaker
some of their rules, etc., based on what is possible with new technologies, not just blockchain, but other new technologies. And so ah we're seeing not just things like prediction markets and perpetuals on the CFTC side, but really digging in both agencies, digging into what the changes in infrastructure look like ah blockchain or otherwise.
00:23:25
Speaker
ah And I think that's been a long time coming. I think um ah recognizing that new technologies allow for greater access, greater speed, greater efficiency, etc., etc., also mean that the re-evaluation is appropriate.
00:23:47
Speaker
Definitely, and it's I think a very crucial time across all fronts. I think that's something that we can take away from these different areas that we've talked about and at the end of the day those things matter a lot for also the people that are trying to build products and infrastructure across this borderless technology.
00:24:05
Speaker
So now Moving to the product side, because I also think that these conversations are important to have both the technological understanding for the policymakers, but also this policy acumen for the people building. So my next question is more like for builders, companies and just institutions in general operating across markets and using blockchain technology. What feels most important to watch right now, and I know that there's multiple things, but we have classification, we have things like licensing, product design, infrastructure treatments, or or something else. Where do you think that people are most likely to get caught off guard in the second half of the year with everything that's happening in the policy scene?
00:24:49
Speaker
Yeah, I actually ah don't think people will get off get caught off guard if they are paying attention. um I think many regulators around the world have done a good job of saying, hey, we're consulting on these issues and we want input.
00:25:09
Speaker
hey we're thinking about new rules here and we want input um so from my perspective if you're paying attention and believe me we are paying attention um you know you shouldn't get caught off guard because you can see what the general direction of travel is um i i think what what would cause a big change potentially um is if there's a big change in and administration. So, for example, if ah the UK were to see a big change as ah ah Prime Minister Starmer steps down and his replacement steps in,
00:25:54
Speaker
You know, there's a lot to look at there. And that change may mean that the FCA, the Bank of England and the other regulators there take a new approach to things.
00:26:07
Speaker
ah So that's where people might get caught a little bit off guard. That said, i don't think it's in a new government's interest to totally do a 180 because a lot of people are building businesses and products and infrastructure in reliance on existing regulations or at least the existing direction of travel of of proposed regulations.
Advice for Crypto Builders
00:26:34
Speaker
And I love that conclusion. i think that if you're paying attention, you shouldn't get caught off guard and regardless. So that's also why we have spaces like these at the end of the day. And since we're almost out of time, just before we wrap, I want to end with the the watch list question. So if we were to fast forward to the end of the year or a year from now, whether six months or a year What do you consider are the developments or these pressure points that you think people should be watching most closely from here? Like US text changes, rulemaking decision, Mika review outcomes, stablecoin frameworks, what would be your your top picks for that?
00:27:14
Speaker
Sure. So I think all of those are good examples. I don't think the MECA review will be done six months from now. It it will probably be done a year from now. Look, I think the U.S. stuff is super important right now, in part because the largest markets tend to be in the U.S., in part because there are many other jurisdictions around the world that sort of keep an eye on what the U.S. is doing.
00:27:39
Speaker
And ah even if they don't copy what we're doing, you know, it sets a standard for other jurisdictions. um And so I think what what I'm going to watch the most closely is what happens in the U.S. over the next six months. So does clarity pass and get signed into law?
00:28:00
Speaker
ah If it does pass, what do the proposed rulemakings from the SEC and the CFTC start to look like? And if it does not pass, still that question of what do those proposed rulemakings look like?
Future Trends and Resources
00:28:14
Speaker
You know, the SEC this week just put out a roadmap of some proposed rulemakings for the next six to 12 months.
00:28:22
Speaker
um I'm still digesting all of that, but there's a lot of stuff about crypto in there, crypto and and and blockchain in there. And so that's the stuff that that we're going to be paying the most attention to.
00:28:36
Speaker
Amazing. Exciting times indeed. so once again, thanks, Lee. It's very hard to synthesize everything on a 30-minute podcast, but that's also why we have the comment letters. And I encourage our listeners to check out both our past and upcoming comment letters that we do where we really try to hone in on these points, explain, and get that messaging across.
00:28:58
Speaker
Because this is a useful recap because, again, it has been an exciting year so far, but it's kind of like fitting together. a whole book into a movie or even shorter than that you can't do it justice so once again thanks lee thanks to our listeners for tuning in that's it for this episode of ask the owl we hope you enjoyed this mid-year global check-in and for more episodes and educational resources check out avalanche policy.com follow us on socials to stay updated and we'll see you all next time
00:29:30
Speaker
We hope you enjoyed this episode of the Policy Layer. If you want to learn more, check out avalanchepolicy.com for free educational resources. And also follow us on social media at avalanchepolicy to stay updated.