The French bitcoin ecosystem trembles to see lawmakers pass a law that will simplify access to crypto assets. France would run the risk of an industrial meltdown, to the detriment of users, entrepreneurs and the adoption of web3 technologies. What if that meant placing too much emphasis on a defensive political reaction?
Later in the afternoon, on Tuesday January 24, the National Assembly is likely to opt for a legislative “punishment” whose impact will be considerable for “the entire French blockchain and cryptocurrency ecosystem,” warned Owen Simonin, aka Hasheur, founder and CEO of crypto investment platform Meria (formerly Just Mining).
This parliamentary novelty that makes the crypto community dizzy is the surprise created by the Senate by requesting the PSAN approval request by October 1st. A pioneer in the regulation of digital assets, France has a two-tier system: compulsory registration with the Financial Markets Authority (MFA), which is relatively accessible, and optional approval, whose procedure is more subtle.
We owe it to Hervé Maurey, Senator of Eure (Normandy), this little text which has unleashed passions since mid-December. Traditionally unaware of crypto issues, Senator Maurey said he had tabled an amendment to the Monetary and Financial Code to secure this bitcoin sector” complex and risky “. An amendment consisting of the insertion of an additional article, which requires that all PSANs be approved in advance by the MFA.
” The recent bankruptcy of the FTX company has highlighted the risks inherent in any investment in cryptoassets, particularly when the company operates outside any regulation. “, he had motivated, urging his colleagues to intervene” to avoid any misuse of the regulatory framework ” current.
In the harshness of France?
The Senate fears that new cryptocurrency operators will rush to apply for registration in France to benefit from the grandfather clause under the MiCA (Cryptocurrency markets). This European regulation on cryptocurrency markets will provide a common legal basis for all 27 member states. It provides for mandatory European homologation, but also a transitional period of 18 months for already registered players.
The senators therefore wanted to pull the rug out from under the feet of crypto companies that would like to take advantage of the French registration, to continue their activities without approval until 2026. Most PSANs would fail to meet the approval requirements, he said. admitted Hervé Maurey.
Jean-Noël Barrot, the minister delegate in charge of the digital transition, had directly acknowledged that the senator’s initiative was a ” welcome booster shot “, given the news of the cryptocurrency market. However, he had asked for the amendment to be withdrawn which seemed to him ” excessively restrictive because it forces companies to obtain approval while the ecosystem that has developed in France allows our country to be identified in Europe as attractive. »
On the gravity scale we can certainly lower the cursor, belittles Hubert de Vauplane, associate lawyer of the American business firm Kramer Levin, interviewed by Numerama. Head of the Fintech & Crypto division in Paris, he has spent more than 30 years in the banking and finance sector, bringing his experience to major institutions. He personally piloted the procedures for registering cryptocurrency exchanges with the MFA.
” Lots of emotions and misunderstandings. Any encryption provider will not have to undergo licensing. The rules have not changed during the game, for already registered players nothing changes significantly Kramer Levin’s associate attorney points out. According to him, this excitement hides another concern: the fear that many PSANs will fail the certification exam.
” Of the sixty companies registered, at least thirty will not have the financial means, neither the human means nor the means of expertise. Not so much the experience in the cryptocurrency sector, but the experience of the broker, the experience in the financial markets, the experience in banking regulation that is missing. A number of players will disappear, many are already in poor condition or even for sale “, he assures.
“Cryptocurrency Players Lack Regulatory Culture”
The problem would rather have come from the approach of the French cryptocurrency industry, which would not have considered the regulatory environment at its fair value. ” The PSAN record was actually a sandbox sophisticated, offering the possibility of acting within a limited framework and on a temporary basis. You must be able to get out of it and go to the next level. This will lead to a big cleanup of the industry, which is good, because the market can’t work with players who don’t have a culture of regulation anchored in their body. » puts Hubert de Vauplane into perspective.
Entrepreneurs native to the bitcoin universe juggle coding, but they wouldn’t have the codes of traditional financial markets. A culture that some crypto players have established themselves in advance, but which others sometimes naively rediscover, worried about having to comply with the forced march of regulations. Especially in terms of costs, presented as insurmountable.
” Overall, between your operating costs, your regulatory costs, all leveled out over three years following the regulator’s reasoning, this represents around 1 million euros, depending on your equity. Raising 1 million in the middle of fintech, it’s not complicated, it is i love money. The problem is not with the amount, the cost, but rather with the mentalitythe mood of the actors “Consider the business lawyer.
The cost would be adjustable, this money would go into operating expenses, equity, hardware and various computer software.
“Technically good” regulators, but political attitudes around cryptocurrencies
The enthusiasm that crosses the crypto ecosystem in the face of the intervention of the legislators fuels a criticism that would have lost relevance: the incompetence in the face of emerging technologies. ” It is a process of intent, at least for the French regulators who have objectively and technically very competent people. At the MFA, the ACPR, the Banque de France, especially the central bank for that matter – due to or thanks to the digital currency – where they are forced to delve into stablecoins, etc. », says Hubert de Vauplane.
However, this acceleration of the regulatory calendar, a sort of French cultural exception that appears needlessly redundant with the European framework, appears as a superfluous political attitude. It would not stop and will not stop the new FTX. Remember that even Bruno Le Maire, the Minister of Economy, who dreams” France as a crypto hub “, he expressed his opposition to this amendment.
The bearers of new technologies have to deal with the traditional system and the democratic principle, wishing that agents who know little about it have the freedom to propose absurd measures. Measures supported, at times, even in high places. Thus, the governor of the Banque de France, François Villeroy de Galhau, said that the rout of the bitcoin market demonstrated the need to impose approval” as fast as possible “.
Meanwhile, the amendment of all fears for the French cryptocurrency industry was discussed on Jan. 17 at the Finance Committee of the National Assembly. To avoid confusion, MEPs have proposed to reformulate the regulatory text by providing that only new operators have to apply for approval by 1 January 2024.
” We are setting a constraint without which some operators would simply register to take advantage of the “grandfather clause” which allows them to continue operating until March 2026 “, explained the rapporteur of the Commission to reassure the French actors already registered.
But what is Europe doing?
” This amendment is not entirely sterile, it follows a fundamental political objective of acting in the public interest, in terms of investor and consumer protection. But I would have preferred a more effective measure, at European level, with an acceleration of the times of the MiCA, the implementation of which will take two years. “, blurs Kramer Levin’s associate attorney. ” Which would have been much more impactful than a mandatory PSAN approval. Why are we not more active in the European institutions? »
The new EU legal framework MiCA could have avoided scandals comparable to FTX, the European Commission believes. This European framework is considered a standard called to influence the regulation of cryptocurrencies globally. However, MiCA draws extensively on French regulatory methods and largely incorporates the conditions set for… PSAN approval.
Meanwhile, EU procedures require legal acts such as the MiCA, which was negotiated in English, to be available in the 24 official languages of the Union. European legislators have approved the principle of the law, but the text of almost 400 pages would give legal translators a hard time. Postponement of the passage of the MiCA to the plenary session of the European Parliament next April.
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