France's Crypto Industry Fights Institutional Caution

A Web 3 summit in Paris has vaunted the country’s strengths and talent pool, but crypto advocates must battle for acceptance from skeptical financiers.

Apr 18, 2022 at 3:29 p.m. UTC

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

To visit Paris Blockchain Week is to see the contradictions faced by those attempting to grow France’s crypto sector.

Modish purple-and-pink lighting rigs shine alongside the ornate painted ceilings of the city’s former stock exchange as attendees in hoodies slump on beanbags next to 17th century tapestries originally intended for the king’s palace at Versailles.

Web 3 seems to be having just as hard a time fitting into France’s cautious political and financial institutions – though some are optimistic that is about to change.

The mood at the Paris summit was buoyed right from the get-go when Binance CEO Changpeng “CZ” Zhao reconfirmed his commitment to invest 100 million euros ($108 million) in the country, including a partnership with local incubator Station F.

That announcement was a “good signal,” French lawmaker Pierre Person told CoinDesk, saying that the country could soon become a local hub for what he calls the “Google of crypto.”

But Person, about to leave his five-year term at France’s National Assembly, also warns there’s a long way for the country to go if it’s going to avoid missing out on the next round of digital innovation as it largely did with Web 2.

His greatest ire is for EU lawmakers in Brussels, who he said are in the middle of an “act of folly” in passing controversial regulations to prevent crypto money laundering and license stablecoins. If they don’t get it right, the next six months could prove “fatal for the internet” in Europe, he said.

But Person also sees a conservatism in the traditional financial sector, which he reckons simply uses the lack of regulation as an excuse to not bother doing any due diligence on a sector which he is convinced will transform society.

“The banks say ‘we don’t want to open a bank account for a startup which does brokerage or crypto-fiat conversions because we don’t have the rules or the framework,’” he told CoinDesk in an interview.

“That’s totally false,” he said. “They just don’t want to trouble themselves to figure out how Coinanalysis or Scorechain work,” citing two companies that can allow users to spot financial and regulatory crypto risks.

Banks like BNP Paribas or Société Générale “just don’t want to adapt themselves … but these young people won’t wait” for them to do so, he warned.

That skepticism about the conventional financial sector is shared by Viktor Fischer, managing partner at the Rockaway’s Blockchain Fund.

He has around $123 million to splurge on the sector, of which half goes into Europe, but he acknowledges there is a major task in educating easily frightened investors.

“I could never speak about bitcoin” while seeking financial support, he told CoinDesk in an interview. “Often when I was fundraising, if I used the word bitcoin in the meeting, it was over.”

Unlike U.S. pension and endowment funds, Europeans aren’t ready to dedicate a portion of their assets to the technologies that are perceived as a higher risk, which he blames on their mindset.

“If you're pessimistic, you sound smart; if you're optimistic, you make money,” he said, citing an oft-quoted dictum of the startup world. “Europeans are very good at being pessimistic.”

Reputation

The complaint that Web 3 is undermined by a negative reputation was heard repeatedly in Paris.

“We’re still debunking many of these myths ... [such as] that this stuff was just a giant Ponzi scheme,” Nicolas Cary, co-founder and vice-chair of blockchain.com, said during an on-stage interview, shortly before calling on “every single person in this room … to help five other people get into crypto.”

Yet the sector, once dominated by full-time specialists, is starting to change, with non-fungible tokens (NFTs) offering a wider appeal to Paris Blockchain Week, the summit’s co-host Michael Amar told CoinDesk.

“To be honest, if you're not in tech or law or finance, it's hard to really get into the crypto space,” he said. “With NFTs, you're talking emotions, marketing, branding: everyone.”

He believes that France’s talent pool and existing economy, with strengths in the arts and high-end companies like Louis Vuitton and Kering, make it well-placed to capitalize.

“We have amazing engineers … they're much more entrepreneurial: They take more risk,” he said. “NFT is really good for luxury; we have an amazing luxury ecosystem.”

But he acknowledges that there have been problems for French companies finding the funding that could let them exit their startup phase – and, as it stands, 70,000 French innovators have fled the country for Silicon Valley.

But a clutch of as many as 20 unicorn successes alongside deals that “might be a bit cheaper than the U.S.” was now starting to tempt financiers back, he said.

Sometimes that financing comes from an unlikely source – not private sector banking or venture capital giants, but the French state.

Bpifrance, an investment bank mainly funded by taxpayers’ money, “took its time” to decide to invest in the world of blockchain, Pascal Gauthier of French crypto hardware specialist Ledger previously told CoinDesk.

But now they need no convincing, Bpifrance’s Managing Director for Investment and Development Yoann Caujolle said in an interview.

“Technology is in our DNA,” he said, citing hundreds of millions of euros invested last year into tech startups, and 1 billion into other tech funds. “If we decided to expand [in Web 3 investment] it’s because top management is totally convinced.”

“We were probably one of the first institutional investors to invest in the theme” of Web 3 technology, he said, saying Bpifrance was “maybe a bit more agile” than classic banks or sovereign funds.

Investing in decentralized architectures has its own set of logistical questions, like how to divest from something that isn’t even a legal entity – but the attractive returns and range of real-world applications mean it’s worth it, he said.

“We don’t invest in bitcoin: We invest in projects and products with a business model that uses this decentralized technology,” he said. “We are past the time where people say it’s a pure scam.”

He cites investments in Lightning-focused bitcoin startup Acinq and Arianee, an Ethereum-based project for tracking the provenance of luxury brands, such as high-end watches and handbags, using blockchain-based watermarks, but to offer new after-sales services if watches or handbags change hands.

And he is, in his own words, “chauvinistic” about what France can achieve in this space.

“We have all the pieces of the jigsaw that are on the table,” he said, citing capital, talent and pro-innovation regulations. “There’s an alignment of planets which we’ve never had.”

Editor's note: Some comments have been translated from French.

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Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

CoinDesk - Unknown

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

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