Financial regulatory policy in the Eurozone is at a turning point, and Dentons—led by recently added partner Michael Huertas—is setting up a new hub in Frankfurt, Germany, to lead clients through the transition.
Huertas likened Europe’s shift from national-level authorities to regional players like the European Central Bank and the European Securities and Markets Authority to the transition in the United States in the 1930s, when the U.S. Securities and Exchange Commission was established and the Federal Reserve Bank gained greater control of the banking system.
“We’re now at that moment here in Europe,” he said.
The goal for the firm’s “Eurozone hub” is to provide clients with a point of contact that provides insight into what’s happening with the ECB and other authorities alongside experience into different European jurisdictions.
“We’re coordinating national experience with Eurozone experience,” Huertas noted, adding that there was a gap in the market for such a service.
The hub was on the agenda when Huertas joined Dentons in April from Baker McKenzie. His career includes previous stops at Latham & Watkins and Allen & Overy, which landed him a secondment to the ECB between 2013 and 2014.
He said the idea for the project emerged from his return to private practice after that stint, looking back to his memories as a very junior lawyer working in-house at Lloyds Banking Group during the global financial crisis, fighting fires in various jurisdictions.
Huertas noted that beyond the centralization trend, the Frankfurt-based ECB is itself beginning to make its own regulations, taking rulebooks produced at the EU’s Brussels headquarters and by the ESMA in Paris and streamlining them.
“They’ve come out of their twos and threes, and they’re more confident in how they are dealing with banks,” he said of the ECB.
Huertas said the hub is also being positioned to guide banks that are relocating from the U.K. to the Eurozone in anticipation of Brexit.
“The goal is to be supervisor sherpas to help navigate a bit of the difference culturally about what the regulations shape and what the compliance challenges are,” he said.
He said that a number of these banks—guided by London law firms—have overlooked the rules put out by European super regulators and had their applications returned to them.
“Then you’re three steps behind where you thought you might be,” Huertas said.
Huertas also sees plenty of openings for Dentons’ European lawyers in the emerging world of crypto-finance, as the ECB becomes a central bank for monitoring the risks of new digital currencies.
He said that attorneys are already involved in helping regulatory authorities roll out a more Europe-wide approach to regulating fintech and cryptocurrency.
“The regulators are having very quickly to upskill themselves at the EU level and drag the hands of the national authorities,” he said. “We’re now asking everyone to be more digital, but we don’t actually have the resources to know what that means.”
Just this week Dentons sponsored a “festival” in Frankfurt for initial coin offerings, or ICOs, the process by which funds are raised for new cryptocurrency ventures.
Huertas said that a growing part of his practice involves working with clients who are looking to use cryptocurrency solutions to monetize their assets. One trend is margin lending of cryptocurrency holdings, where owners are putting up bitcoins or other digital assets as collateral for loans.
Also hot is tokenization. Owners of securities in, for example, private limited companies—which can’t be mobilized or used as collateral because they are not embedded in a market-clearing system—are looking to use cryptocurrency to convert them into tokens that can be traded.
“ They’re looking to actually help open up pockets of financial assets so that they can be mobilized more efficiently,” Huertas said.