Good morning. Here’s what’s happening:

Prices:Bitcoin continued its two-day swoon, dropping below $28K at one point. The head of research at Canadian crypto asset manager 3iQ linked its decline to U.S. regulatory woes and also noted that "market liquidity remains heavily tilted to Asia."

Insights:With MICA and a separate crypto-related rule, European legislators have built a promising, regulatory foundation for digital assets. U.S. efforts remain disjointed and counterproductive, CoinDesk columnist Daniel Kuhn writes in The Node.

Bitcoin Decline Due to U.S. Regulatory Woes

U.S. crypto regulatory woes have been weighing heavily on bitcoin.

So wrote Mark Connors, the head of research at Canadian crypto asset manager 3iQ, in a series of texts discussing BTC's stumble from what seemed safe heights above $30,000.

"The Kabuki theatre that unfolded in Washington this week suggests Asia and other jurisdictions will continue to gain market share from the U.S., Connors wrote to CoinDesk, adding: "Coinbase’s decision to get licensed in Bermuda to launch an exchange as early as next week shows that U.S. digital asset companies are now voting with their feet. So this week we had both price and regulatory volatility, with only one clear loser, the U.S. economy."

The largest cryptocurrency by market capitalization was recently trading at about $28,100, down about 2.7% over the past 24 hours. But earlier on Thursday, bitcoin fell briefly to $27,991 on Coinbase, its lowest level since April 9. The decline continued a two-day slump that started early Wednesday amid a hot U.K. inflation report and massive sell-off on Binance. BTC is down about 10% from last week's high near $31,000 with investors more fretful than upbeat about crypto assets' path forward.

Connors noted that "market liquidity remains heavily tilted to Asia, so he was "not surprised to see bitcoin's downswing start as markets in that part of the world closed. "Remember, last May and June dislocations occurred in a similar window," he wrote.

Ether was recently changing hands at about $1,936, off a few fractions of a point and well off its recent, Shanghai upgrade highs above $2,100. Other major cryptos were largely in the red, mostly darker shades. XRP, the token of the XRP open source public blockchain XRP Ledger, and ARB, the native crypto of the Arbitrum layer 2 blockchain, were both down more than 3.5%. TheCoinDesk Market Index, a measure of crypto markets overall performance, was recently down 1.3%.

Equity markets fell, albeit not severely, with the tech-focused Nasdaq Composite and S&P 500, which has a strong technology component, off 0.8% and 0.6%, respectively. Gold hovered comfortably over $2,000, suggesting that investor appetites for assets that hold their value in good times and bad remained strong.

Despite encouraging first quarter earnings from a number of major banks, investors remain warily watchful, given the decline of a number of important economic indicators that may foreshadow recession. Recent jobs data has indicated a fall-off in the torrid employment market, and on Thursday, the National Association of Realtors monthly report showed home prices registering their biggest decline since 2012 and mortgage rates rising.

Meanwhile, Connors wrote that "more volatility" was likely in store, "but not the YTD ‘upside’ volatility we have seen so far in 2023."

"We may be entering a period of consolidation as U.S. regulation dims hopes and prompts regulatory reboots by many players. Both are counteracting the long running and structural tailwinds for BTC" that the company highlighted in its 2023 Outlook.

Why the EU Has MiCA and the U.S. Has Securities Law Confusion

The European Parliament went ahead and did it: Today, after years of deliberations and at least twoofficial delays, the landmark Markets in Crypto-Assets (MiCA) regulatory framework was voted in. European Union legislators also passed a separate crypto-related rule known as the Transfer of Funds regulation that imposes stronger surveillance and identification requirements for crypto operators, CoinDesk’sJack Schickler reported.

The rules were described as a"world first”by the European Commission's Mairead McGuinness, and also an “end of the Wild West era for crypto assets," according to Green Party lawmaker Ernest Urtasun. The laws, which will be enforced at the state-level, still need to be officially approved by the supra-governmental body called the EU Council, are just about cleared to take effect next year. (The Council’s approval is more of a formality at this point, considering it already approved the text of the law last year.)

For many, MiCA represents a crucial step forward for the crypto industry. It’s the first major attempt to provide a comprehensive set of rules for crypto companies so they know in advance what they can and cannot do and where their responsibilities lie if they want to operate in the 27-nation strong trading bloc. The European Unionhopes it sets the global standard(and, in some sense, is worried about MiCA’s effectiveness in the EU if similar rules are not adopted everywhere).

CoinDeskhaswrittena numberof overviewsof the legal framework. But. in short, MiCA requires crypto firms – like wallet providers and exchanges – to be licensed by the EU, and comply with money laundering and terrorism finance safeguards if they want to serve EU-based customers. Some have balked at the reporting standards, which will undoubtedly weaken privacy for crypto users in the name of customer safety and national security.