France's central bank wants to keep banks and other financial institutions out of the cryptocurrency business.
In a report published at the beginning of March, the Bank of France proposes to ban insurance companies, banks and trust companies from "taking part in deposits and loans in crypto-assets." It also advocates prohibiting all marketing of "crypto-asset" savings products to the public, save for the "most informed investors."
The report, which provides an overview of the technology and suggests strict regulatory provisions, claims that cryptocurrencies do not constitute money and emphasizes that they are not legal tender.
The document labels them instead as a medium of cyberattacks, money laundering and terrorism financing.
"Very little value is expressed in these crypto-assets," the authors claim. They remark further:
"The anonymity that characterizes the means of production and transfer of the majority of crypto-assets favors above all a risk of them being used to criminal ends (sold on the internet for illicit services or goods) or used to the end of money laundering and the financing of terrorism."
Echoing other critics, the report also dismisses the recent run up in "the price of crypto-assets" as a "speculative bubble" akin to the "tulip mania" period in the Netherlands from 1634 to 1637.
As for the central bank's suggested regulatory framework, it writes that its priority is to institute anti-money-laundering (AML) and combating the financing of terrorism (CFT) measures, which would be achieved by expanding the European Union's Fourth Anti-Money Laundering Directive.
It also expressed concerns about investor protection and "cyber-risks," and cautioned that the crypto industry's "boom in activity" could potentially destabilize financial markets.
The report's first recommendation is to "regulate the services offered at the interface between the real economy and crypto-assets" – meaning primarily that crypto exchanges should be considered payment services providers and should be subject to corresponding legal requirements.
The bank goes on to suggest strict supervision of crypto-asset investments, including the aforementioned prohibition of banks, insurance companies and trust companies from dealing in crypto deposits and loans, and marketing prohibitions associated with savings products.
It also writes that it agrees with the suggestion of France's stock market regulator, the Autorite des Marches Financiers (AMF), that cryptocurrency derivatives should not be marketed to the public.
The bank closes its report with an appeal to global regulators to enact "international-level" measures to oversee crypto-assets, arguing that a lack of coordination could undermine the efficacy of any national-level actions.
"Considering the immaterial nature of crypto-assets and the use of internet related technologies that facilitate cross border services," the document concludes, "the heterogeneity of national regulations could prevent a comprehensive supervision of the risks at hand."
Editor's Note: Some of the statements have been translated from French.
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