Crypto advocates are pinning their hopes on France’s National Assembly, the lower house of the French Parliament, to overturn a legal change they worry could wreck France’s goal of becoming an innovative crypto hub.
Making crypto companies seek mandatory licenses to operate in France raises a number of problems, a key lawmaker has told CoinDesk. However, the legislative plans to order licensing have gained increasing support from regulators seeking to avoid FTX-style collapses.
A surprise amendment agreed by the French Senate in December would mean any crypto company that isn’t registered with the Financial Markets Authority (AMF) by Oct. 1, 2023, would need to seek a license – a more burdensome procedure involving checks on financial resources and business conduct that so far no company has successfully pursued.
“The recent bankruptcy of FTX has put a spotlight on the inherent risk of all investment in cryptoassets, in particular when the company operates outside of any regulation,” Senator Hervé Maurey said in a text submitted alongside his amendment. He added the change will “avoid any misuse of the regulatory framework” as new European Union (EU) rules known as the Markets in Crypto Assets regulation (MiCA) go into effect.
However, his concern may not be shared among lawmakers in the National Assembly, which also needs to agree to the change and whose Finance Committee is due to discuss it next week.
“The solution proposed by the Senate raises difficulties which will have to be looked at closely,” lawmaker Daniel Labaronne said in an email to CoinDesk. “It poses problems of method and of timing.”
“The Senate was right to put this subject on the table,” said Labaronne, who will pen the Committee’s views on behalf of the Assembly ahead of a Jan. 24 plenary discussion, adding that he hopes “to arrive at a more satisfactory arrangement” than the Senate’s.
Maurey appears to be concerned that current arrangements could create a new loophole, offering an incentive for companies to apply for the lighter registration regime – under which regulators check compliance with governance and money laundering norms – to escape more heavy-handed regulation.
MiCA requires crypto providers such as exchanges and wallet companies to be authorized and meet financial stability and consumer protection norms, and is expected to enter into force late 2024 – but those already recognized under a national system such as France’s will get an extra 18 months to comply.
Regulators including the AMF and the French central bank have now supported Maurey’s proposals – but some argue they will be unworkable, damage the economy and run counter to MiCA.
The Senate amendment is “premature,” Emilien Bernard-Alzias, a partner at law firm Simmons & Simmons in Paris, told CoinDesk in a telephone interview. “It’s very bad for the competitiveness of France … it will kill innovation.”
His worry is that, under Maurey’s plans and until MiCA is up and running, crypto firms based in other EU member states could have to seek a duplicate license in France – despite the fact that MiCA is supposed to ensure they can operate across the bloc with a single authorization. In practice, few companies would bother with such a burdensome step, Bernard-Alzias said, and they could end up skipping the French market entirely.
Worse still, the plan could prove administratively impossible. He estimates there’s already a waiting list of 50 applicants in a registration process that takes at least a year.
“The AMF will never succeed in treating all these dossiers before the deadline,” he said, describing the process as “already very long and very complex.”
The AMF did not respond to a CoinDesk request for comment on its administrative capacity or the size of the backlog.
For Faustine Fleuret, president of crypto advocacy group ADAN, the change is a “bad omen” for the sector – and fails to take account of existing hiccups in the system.
Rather than hounding those based in the country, there needs to be tougher action against foreign noncompliant firms, she said, alongside improvements to licensing conditions that are impossible to meet in practice – such as the duty to have insurance that the market doesn't yet provide.
“Authorities have to understand the importance of developing the sector in France,” Fleuret said in a telephone interview. “If you want to keep jobs, talent and our digital sovereignty, it’s that we have to defend.”
“We are very disappointed the amendment was adopted in the Senate,” she said.
But, she adds, she was heartened that the government attempted to oppose the move – and that an increased awareness of and support for the sector could lead to a better-founded discussion in the Assembly.
Quotations have been translated.
UPDATE (Jan. 11, 08:35 UTC): Corrects Fleuret's quote in 18th paragraph.
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