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Regulation of the crypto-asset industry : acceleration in response to the crisis of confidence

Updated: Jan 24, 2023

The amendment presented by the senator, Mr. Hervé Maurey, on December 12, marks a great acceleration in the application of the requirements imposed by the European MiCA regulations in France. Today, Tuesday January 24, it will be submitted to the vote of parliamentarians.

Promoting the growth of innovation is a fundamental axis of competitiveness and attractiveness for France and Europe. But "Innovation" should not rhyme with "Far West".

While it seems appropriate to regulate the crypto-currency industry to establish the necessary framework of trust by protecting investors and ensuring the transparency of transactions, it is crucial to find the right balance in the definition and deployment of a legislative and regulatory framework responding in a harmonized way to the real challenges of the world of crypto-assets on the scale of France and Europe.

The amendment "aims to require any player wishing to exercise the profession of digital asset service provider (PSAN) to be approved in advance by the Autorité des marchés financiers (AMF) from 1 October at the latest. 2023”.

This amendment was introduced in response to the recent scandal at the world's second largest cryptocurrency trading platform, FTX, which collapsed within days after shocking revelations about its questionable practices. Conflicts of interest, opacity, disastrous financial management, the bankruptcy of the giant FTX has had a domino effect on other players in the sector and has largely shaken the confidence of investors and the general public in cryptocurrencies.

« As part of the law of May 22, 2019 relating to the growth and transformation of companies (Pacte Law), France has in fact set up a pioneering system for PSANs, based on a two-tier mechanism : a registration mandatory and optional certification. (…) More difficult to obtain, the approval takes into account more complete elements on the situation of the shareholders and the service provider (financial situation, capital requirement, regulatory financial statements, insurance, security of the computer system, etc.). Today, no PSAN has requested its approval, while around sixty service providers are registered. (…). »

Thus, the text « must make it possible to close the registration procedure and impose that of approval, to avoid any misuse of the regulatory framework. »

If the government immediately issued an unfavorable opinion, the amendment has the approval of the AMF and the Banque de France.

Ms. Barbat-Layani, President of the AMF, and former leader of the banking lobby, also recalled in her recent speech:

« Being the regulator of a major financial center also means that we must give innovation its rightful place. (..) This does not mean that we have to be in blissful laissez-faire or anything. Everyone here has the FTX case in mind. (…) Obviously, it is necessary that the crypto universe now clearly makes the choice of regulation and investor protection. (…) The AMF, like the parliament, calls for an acceleration of the transition to the mandatory licensing regime for providers who are not currently registered. »

The Deputy Governor of the Banque de France, Mr. Beau, explained in particular that the implementation of this system seemed to him inevitable.

Mr. Villeroy de Galhau, Governor of the institution, President of the ACPR, does not fail to underline : « As regards crypto-assets, all the disorders of 2022 nourish a simple conviction : it is desirable that France pass as soon as possible to the mandatory authorization of the PSANs (digital asset service providers) rather than to their simple registration. And this well before the entry into application of MiCA to establish a necessary framework of trust. »

Concretely, this French system does not solve the risks of fraud highlighted in the FTX affair, and seems more to be part of an exemplary French regulatory reaction to the events that have brought discredit to the crypto industry ; France having chosen to position itself as a pioneer in legislative and regulatory matters.

That being said, this complex approval procedure and its untenable schedule (if it were to be validated as it stands by the deputies) are driving a wedge between France and the other countries in the dynamic crypto-asset market. The risk is that France will lose its attractiveness and competitiveness, with French companies forced to take up residence in a more "crypto-friendly" country (such as Switzerland, Malta, the Netherlands, etc.) and users/investors completely losing interest in French platforms.

It is in this context that the European Union is delaying the vote on the MiCA regulation and postponing it to April, when it was supposed to take place in February.



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