On the one hand, the bitcoin challenger accompanied by a crypto ecosystem that dreams of currencies without intermediaries. On the other hand, the great power, Europe, with its sovereign currency, the euro, which supports stability. Suffice it to say that the dialogue was not always fluid. After months of very heated exchanges, the two sides still managed to find a compromise to live in harmony. MiCA Regulation (Cryptocurrency market) and FRR (Fund transfer regulations) were approved on 12 October by the Economic Committee of the European Parliament for implementation by the beginning of 2024. With them, new rules of life for cryptocurrencies, after two years of heated discussions.
The TFR requires stricter traceability of exchanges in order to combat money laundering or the financing of illegal activities. MiCA, the biggest piece, meanwhile, brings the consumer protection obligations of crypto companies closer to those of the banking world. Their responsibility will, for example, be engaged in the event of the loss of cryptocurrencies belonging to investors, which has not happened until now. What paves the way for legal proceedings and compensation. Any new “crypto” launched on the continent will also have to be thoroughly researched by the regulator.
A necessity for the European Union. First of all, due to the proliferation of crypto-assets since the Covid-19 crisis (according to a study by the European Central Bank, almost 10% of the population of Western Europe has a type of bitcoin or ethereum cryptocurrency). Then above all because the scandals have multiplied, with a spectacular economic collapse in the spring, failures galore such as the Terra project, or even scams and hacks that have made small owners lose millions of euros without the possibility of recourse.
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“France is a country where the regulations are clear”
This crackdown could, however, also benefit the cryptocurrency industry itself. It’s counterintuitive, but a tighter regulatory framework can actually generate investment. “France has already been there with the vote of the Pacte law in 2019, the birth of the status of service provider on digital assets, which many actors feared. Finally, what we see today is that France is a country where regulations I am clear and for some players it is good to settle there “, confides a crypto sector expert. Even the major players in the sector seem to be looking with confidence at these new regulations.
Eric Anziani, head of Crypto.com, announced this week a € 150 million investment in France and made Paris its European headquarters. The Singapore-based company has just registered in France as a PSAN (digital asset service provider) with the Autorité des marchés financiers (AMF). “Compliance in every country costs a lot of money every time,” recalls Eric Anziani. The new framework therefore represents, in his eyes, a step forward for the continent in terms of “clarity and harmonization” of legislation which makes the vast EU market more attractive. And he’s not the only one doing this analysis. Its direct competitor, the cryptocurrency exchange platform Binance, recently pledged to invest $ 100 million in France.
“MiCA helps define the different types of cryptocurrencies, the conditions under which a cryptocurrency issuer can act. This is likely to strengthen confidence in their use. At the same time, these rules confer respectability and a harmonized legal framework. For companies. in the large market that is the EU. It is extraordinarily positive “, analyzes Frédérick Lacroix, of Clifford Chance. According to the lawyer, cryptocurrency could, as a result, infuse more into the traditional economy. “We can expect banks and insurers to be able to offer cryptographic services themselves. Because they will be able to work with service providers subject to the same regulator,” predicts the expert.
For smaller companies the equation is certainly a bit more delicate, because compliance imposed by the MiCA and the TFR will have a cost. This legal certainty should in any case benefit those who manage to overcome this milestone, “facilitating fundraising and allowing them to stand out from their competitors”, reassures Franck Guiader, expert in digital finance and regulation of innovations at the Gide law firm.
This regulatory era is finally getting off to a better start than expected. Originally, some provisions questioned the very foundations of cryptocurrencies. A first version specifically envisaged banning “proof-of-work” (proof of work) in the name of the fight against global warming, which would have condemned bitcoin and many other assets based on this energy-intensive method of validation. . Finally, companies will simply have to declare information relating to their environmental and climate footprint.
The final version of MiCA also excludes most NFTs – those non-fungible tokens that broke into the art world – as well as DeFi, decentralized finance. “Consumer laws for NFTs, or those governing financial markets, are already sufficient for most cryptocurrency use cases,” comments Franck Guiader.
The only big losers: stablecoins, severely repressed by the MiCA. These cryptocurrencies, whose value does not fluctuate thanks to their support for fiat currencies such as the dollar or the euro, are the closest means of payment to the normal means of payment. This inevitably threatens the “monetary sovereignty” of the European Union, insists the regulator. The issuance of these tokens will therefore be limited and their reserves of value particularly controlled. The downside at this level is that powerful stablecoins, including one in euros, are already thriving across the Atlantic, outside of any regulatory framework. “There is a risk of seeing the development of an ‘offshore’ euro market, with large European companies trading between euro / dollar tokens. We are about to lose an important economic and commercial weapon”, warns Frédérick Lacroix , by Clifford Chance. However, MiCA is not completely solved. Many additions are expected during the 18 months of implementation. With, perhaps the key, new developments.
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