Crypto trading company Coinhouse has become the first crypto company to be registered with France’s top financial regulator, the Financial Markets Authority (AMF).
The registration means Coinhouse now has a shot at getting banking services in France, which could give the firm cheaper services than the German bank it currently works with.
“It’s a recognition from the AMF that you’re a serious actor and do some strict [know-your-customer] policy,” Coinhouse spokesman Julien Moretto told CoinDesk.
To receive a registration, Coinhouse had to prove it was capable of freezing assets and making funds available in the case of proven fraud. It also had to hire a compliance controller to detect suspicious financial activity and prove it could use blockchain analysis tools like Scorechain.
The firm is now raising equity and integrating risk warnings, investment disclaimers and other legal documents to make a bid for the French crypto license. Based on its discussions with the AMF, it expects the regulator to begin issuing licenses by September 2020, Moretto added.
“The registration will soon be mandatory to do buy/sell and custody activities on cryptocurrency in France, but the license will be important for the brand image,” said Sandrine Lebeau, director of compliance and risk at Coinhouse. “The license will give us the right to do commercials and ads about our services.”
Pas de bébé
In France, the only firms that are required to register with the AMF for anti-money laundering and anti-terrorist financing reasons are those firms dealing with fiat-to-crypto or crypto-to-fiat services. The requirements come out of guidelines based on France’s PACTE law, one of the first crypto legislative packages passed in Europe in May 2019.
“I think we improved on security and trust working with the regulator,” Lebeau said. “I don't know if the compliance is really consumer friendly, but it improves funds security for sure, which is one of our top priorities.”
Securing banking services has been the “main obstacle” to the fast expansion of France’s crypto sector, said Emilien Bernard-Alzias, a Paris-based partner at law firm Simmons & Simmons.
“PACTE law was supposed to fix this by forcing French banks to provide basic banking services to crypto firms,” he said.
While the law has been in place since November 2019, only one ICO and one crypto firm – Coinhouse – have achieved this status with the AMF, Bernard-Alzias said. Moreover, the law only covers basic deposit or payment account services, which means French banks can still deny a full range of services to crypto firms.
“To the best of my knowledge, at least five others crypto players, including non-French, are in discussion with AMF to get the registration statutes,” said Hubert de Vauplane, a partner at law firm Kramer Levin Naftalis & Frankel.
In addition to cheaper banking, Coinhouse also expects to be able to attract larger hedge funds and family offices as clients, Moretto said. The trading firm wants to encourage those clients to “put a little crypto in [their] portfolio management,” he said.
If banks begin to show interest in crypto custody, Coinhouse could also offer those banks crypto-custody technology.
Coinhouse has also developed some DeFi services, like staking, that require crypto custody. With the registration, it will now offer custody services for customers instead of having customers carry staked crypto in their personal wallets.
Coinhouse also plans to develop a euro-pegged stablecoin that will allow customers to pre-fund their accounts to buy crypto more quickly, Moretto said.
In addition to these new products, Moretto expects to see client demand increase across the entire business as a result of the registration and subsequent license.
“Now we can say we are registered and recognized by financial authorities,” Moretto said.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.