Cryptocurrencies

French crypto regulations, from hope to disillusionment – Cryptocurrencies

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For two years when crypto players first sat at the senator’s table and then engaged in discussions with MPs, Bruno Le Maire’s decree of December 9 has cut short the ambitions of French crypto players. How did we get there?

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2018, good intentions

It is February 7, 2018, for one of the first times in France, the state is taking a keen interest in crypto-currencies. It must be said that after a Bitcoin touching the 20,000 dollars and the media hype around it, it’s hard to ignore the phenomenon! But the time to come together, the volatility of the queen of cryptos has done somewhat reduce the ambient euphoria.

It is in this context that the representatives of theFinancial Markets Authority (AMF), treasure, l’Prudential Control and Resolution Authority (ACPR) and the Bank of France on one side and Coinhouse, Ethereum France and iExec the other. Senators were able to ask their questions to better understand what blockchain and crypto-assets were, but above all to look for initial avenues for the regulation of these new digital assets.

The key words of the 3-hour hearing will be above all the fight against money laundering (ML) and the financing of terrorism (TF) on the side of institutional finance and strong demand for clear regulatory framework on the side of decentralized finance.

At the time, the AMF advocated do not set a mandatory framework but rather optional so as not to penalize the competitiveness of companies wishing to operate in France.
The Banque de France declared already use a private blockchain internally but did not place any value on Bitcoin and other crypto-assets.
The Treasury, for its part, wanted to separate the use of the blockchain from crypto-assets.

In an attempt to allay this fear, Coinhouse indicated that from the first euro exchanged against cryptos, an identity card was requested as well as profiling was carried out.

One senator argued that it was not in the G20 countries that money laundering was the most common and that it should not be not fall into over-regulation at the risk of being counterproductive.

Gerard Langlet recalled that technological reality should not be at the service of an excess of supervision of individual freedoms.

On December 26, 2018, a blockchain decree was issued in extremis (through an order) with the name Shared Electronic Recording Device (DEEP). Thanks to a few technical inaccuracies, innovation could take place, putting France in the position of a “crypto-friendly” nation.

2019, PACTE law: AMF and PSAN visa

But make no mistake, having made the blockchain legally exist was above all to better impose it.

On May 22, 2019, the PACTE law came into force and the term Digital Asset Service Provider (PSAN) appeared and above all framed. At this time, two categories of providers are created:

  • Companies or service providers whose activity is “The custody service on behalf of third parties of digital assets or access to digital assets” or “the service of buying or selling digital assets in legal tender“Have an obligation to register with the AMF in order to obtain a magic sesame to practice their profession in the territory.
  • Others, who are trading crypto <> crypto, do not have this obligation.

To qualify as a PSAN, you have to exist in the real world like any other business. Decentralized exchanges (DEX) are therefore not affected by this obligation since they are subject to no centralized control body.

The first difficulties appear at this time because not only is the procedure laborious but also the file processing time is long. The primary purpose of this measure was to protect the taxpayer from the risks associated with ICOs, and the AMF’s approval was to serve as a guarantee of quality for the token issuing company.

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In over a year and a half, only 4 companies have obtained AMF approval.

Crypto companies operating in France had until December 18, 2020 to register, in which case their representative could face two years in prison and a 30,000 euros fine.

2020, ADAN and disillusionment

An exceptional year if it is, a lot has happened, including the acceleration of the digital transition all over the world. It was also at the beginning of the year that the Association for the Development of Digital Assets (ADAN) was born.

Faced with the difficulty that crypto players have in making themselves heard, the creation of this association aims to represent them in order to be able to speak with a single voice to our elected officials about the various recommendations from industry experts. In this desire for continued dialogue with the State and transparency with the community, ADAN has published numerous reports and press releases on their site.

Unfortunately, the financial crisis that Europe has gone through has reshuffled the priority cards and the difficulties encountered by the French crypto players only got worse.

In its inventory for the start of the 2020 school year, ADAN draws up a fairly negative picture the attractiveness for France of the crypto ecosystem despite the legislative avant-garde that the country has shown so far.

Little or no support from the state for start-ups, almost systematic refusal (89%) of banks to open an account for crypto players, or very restrictive administrative length to obtain a visa from the AMF. Otherwise, PSAN status does not convince the banks of the seriousness of a company wanting to open an activity in the territory.

On the user side, 35% of respondents were refused a bank transaction to a cryptocurrency exchange view were faced with additional confirmations to discourage them from their purchase.

The coup de grace came on December 9, 2020 with an order that toughened regulations surrounding the status of PSANs. While until then crypto <> crypto exchanges were not affected by the requirement to have an AMF visa, the latter will now have to submit to this new legislation within 6 months under penalty of being banned from practicing in the territory.

In addition, the Know Your Customer (KYC) procedure has also become more restrictive: while until then only transactions exceeding an amount of 1000 € were subject to user identity verification, it is now from the first euro proof of identity is required. In addition to this proof of identity, a SEPA transfer must complete this procedure.

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Enough to seriously question the real understanding of our elected officials of the international character of cryptocurrencies that do not know the borders of a country.

By the end of the year, two more decrees are expected to complete the legislative arsenal surrounding cryptocurrencies. But with 64% of French crypto players planning to relocate their activity in September 2020, what use will an authorization that no one will use?

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