BRUSSELS, Belgium – As the U.S. securities watchdog flexes its muscles against major crypto exchanges Binance and Coinbase, officials in the European Union are showing off a brand-new crypto framework they say offers greater clarity to blockchain innovators.

Few if any of the internet giants that dominate Web2 can call the EU their home, but some in Brussels now wonder if Europe’s different approach – regulate first and then see how the market responds – could give it the edge.

Some argue the bloc’s new Markets in Crypto Assets (MiCA) law makes it well-placed to compete with those across the Atlantic, where big crypto players complain the Securities and Exchange Commission (SEC) is indulging in regulation by enforcement rather than setting out clear rules.

“What we hear from businesses is that now a lot of them are looking to grow, to stay safe, and to manage their risks,” said Joachim Schwerin, a principal economist in the European Commission’s department responsible for economic growth. “They don’t know what will happen in the U.S., so they come to us. This is good for us, this is good for competitiveness.”

The SEC, which issued suits on Monday and Tuesday against the two popular exchanges, is broadly arguing that the platforms should have registered to offer trading, clearing and brokerage services for crypto, on the grounds that native tokens for blockchains such as Solana (SOL), Cardano (ADA) and Polygon (MATIC) constitute securities under existing financial law.

Binance’s U.S. arm has called the claims “baseless,” while Coinbase’s Chief legal Officer Paul Grewal said they were damaging to U.S. competitiveness.

“We don’t think … that regulators can sit in an office and wait for someone to come in, asking for advice or information, and then before that person goes out, I decide whether to arrest that guy or not,” Schwerin said. “That is not the division of labor that we have in Europe.”

The EU has taken a different approach, legislating a separate tailor-made regime that proponents say better matches what crypto is for. Lawmaker Ondřej Kovařík – the main negotiator of MiCA on behalf of the economically liberal Renew Europe party – appears to agree this rules out the kind of uncertain enforcement seen in the U.S.

U.S. authorities “let you do whatever you want until they don’t, and then they stop you… we don’t have this approach here,” Kovařík said, adding the recent SEC moves “can be an opportunity” for Europe.

“I hear businesses saying they may be considering shifting … because of the new framework” offered by MiCA, he said – but stressed the law would need to be implemented smartly.

National and European regulatory agencies are due to set out exactly how the rules will work over the coming 12-18 months. “If it’s not applied successfully, then the trend can actually very easily be overturned,” he said.

In France – the EU member with perhaps the most well-developed crypto licensing regime before MiCA takes effect – regulators have said fleeing U.S. companies are “welcome,” while influential U.S. lawmaker Patrick McHenry (R–N.C.) has said Europe’s relative success in legislating for crypto “should send chills up the spines of Americans” because of the likely boost to innovation.

Edited by Sandali Handagama.