The French Ministry for the Economy and Finance has outlined regulatory measures to be put in place by the year’s end for financial institutions and users of bitcoin and other digital currencies.
The 11th July communiqué, which came from the office of Budget and Public Accounts Minister Michel Sapin, emerged in response to a report by Tracfin, a unit that targets money laundering and illicit finance operations.
Sapin said in a statement:
“This report shows that even if the existing volumes of virtual currencies are not likely to destabilize the financial system, these unofficial currencies are developing and have risks of illegal or fraudulent use.”
He presented four regulatory actions with the aim of “securing” users of “these currencies that offer particular opportunities for transactions lower than traditional payment services costs".
Transparency cited by regulators
The new regulations require bitcoin “distributors” to identify and verify their users to limit the level of anonymity. As well, regulators will have to clarify the treatment of bitcoin and other digital currencies in France’s tax system. The digital currency will also become subject to capital gains taxes.
The document read:
“We have proposed […] a threshold on the margin tax of €5,000. We believe that France should let people try, invest and develop business with bitcoin before we tax it.”
Ultimately, the regulations are presented as a means to promote greater transparency in France's bitcoin market. Due to the pseudonymous means of bitcoin, the document also calls on regulators to discuss and present a spending cap for digital currency transactions, in keeping with the current rules for cash payments.
Finally, at the European level, the French government is now increasing regulation of bitcoin exchanges that handle fiat currencies. Specifically, exchanges are required to report on every transaction and verify the identity of the parties involved in any bitcoin activity.
France's stance on bitcoin evolving
Speaking for the Association Bitcoin France, President Philippe Rodriguez told CoinDesk that it disagrees with the key points of the new guidance. However, he acknowledged the positive aspects of the new regulation, saying:
“Yes, this is going in the right direction. Although we disagree on the verification on 'every transaction' of identity, we understand the principles.”
France’s bitcoin community has evolved as discourse - and action - on the federal level continues to take shape. La Maison du Bitcoin opened in May, bringing Europe its first bitcoin center. It offers flexible co-working space, assistance for bitcoin startup companies, workshops, hackathons, meetups and a Lamassu bitcoin ATM.
Imposing taxes on bitcoin is a controversial issue in the country - as well as throughout the world - because of the uncertain legal definition of the digital currency. Earlier this year, the French government said that although it does not officially recognize bitcoin as a currency, it can still impose income taxes.
It was the second acknowledgment from the government since the central bank issued warnings in December against price volatility.
Stan Higgins contributed reporting.