The European Union (EU) is losing pace in the Capital Markets, a concerning trend a few workable solutions including crypto. Taking to the X platform, Patrick Hansen, Circle’s EU Strategy and Policy Executive has outlined a series of concerning trends in the bloc’s capital market scene.
The Negative Capital Market Trend In the EU
According to Hansen, the EU capital market is no longer competitive and might need an immediate overhaul. If not attended to, he predicts that there is a “zero chance” the region will be economically competitive for hungry tech areas including Artificial Intelligence (AI).
One of the negative trend is the slump in the EU’s global equity market cap. As of 2009, this metric stands at roughly 16% compared to the 34% for the United States. By the end of 2003, the share of EU has slumped to 11% while that of the United States have grown to 45%.
1/ Our EU capital markets are no longer competitive & this needs to change ASAP.
Otherwise there is zero chance we will be economically competitive, esp. in financing-hungry tech areas like AI.
A few concerning trends/facts & key solutions to this problem 🧵 pic.twitter.com/ZQRjyL9gIw
— Patrick Hansen (@paddi_hansen) May 25, 2024
Secondly, EU share of global Initial Public Offerings (IPOs) by value from 2015 to 2020 came in at 15%. This figure according to Hansen is less than half the 32% the US boasts of. Also, another concerning trend in the EU Capital Markets landscape is the visible fragmentation. There are about 27 Central Securities Depositories (CSDs) and 14 Central Counterparties (CCPs) that are licensed to operate within the EU.
In the United States, the case is different as one 1 CSD and 8 CCP operates, helping to floor the EU with no cross-border order book. To compound this fragmentation, More households (32%) are holding cash compared to the 15% in the US.
Lastly, EU stocks accounted for 51% of the total assets of EU UCITS Equity Fund in 2015. This figure has slumped to 35% in 2022 while that of US grew from 27% to 42% within the same time span.
Can Crypto Resolve EU Capital Market Woes?
With the problem in the EU properly defined by Hansen, the question now remains a probable working solution. While not identified, crypto might be the missing piece in solving the EU Capital Market woes.
With Markets In Crypto Assets (MiCA) regulatory framework set to be implemented in the coming months, opening the doors to crypto investors might help change the bloc’s capital market outlook. The United States just fully threw its weight behind spot Bitcoin ETF and the Ethereum counterpart.
The United Kingdom’s Financial Conduct Authority (FCA) also greenlighted the launch of crypto ETPs on the London Stock Exchange (LSE) recently. With the tactical mobilization of funds to crypto, a complementary embrace of crypto might benefit the EU remarkably.
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