2023 started on a strong note for the crypto industry in France.
Senator Hervé Maurey, a centrist, caught the industry - and the government - by surprise in adding an amendment to an otherwise unrelated legislation. The change would have drastically strengthened the authorisation framework for digital asset services providers (DASPs, or so-called 'PSANs' in French) in an abruptly short timeline, well ahead of that set out by the Markets in Crypto-Assets Regulation (MiCA) for the EU.
A compromise was adopted by the Assemblée Nationale yesterday that will see prospective DASPs applying for registration from 1 July 2023 go through a strengthened registration process and in particular demonstrate the robustness of their IT systems. The revised law will in practice apply from 1 January 2024, giving 6 months to the Autorité des Marchés Financiers (AMF) to assess an application.
This compromise will be welcomed by firms. Many would not have been able to meet the stringent requirements associated with the license, or 'agrément' the Maurey amendment would have required. The episode nonetheless reveals a number of underlying themes that have implications for crypto, not only in France but in the EU, and for French politics more widely.
What's happening behind the scenes?
The episode is reflective of wider concerns about the opaque but growing crypto world, following the spectacular collapse of FTX (which we recently wrote about here). As the potential impact on consumers becomes apparent, those concerns made their way into the political debate - like they did in the UK or the US.
In France, the concerns are intertwined with the wider EU framework. MiCA is coming in April 2024 (and only in 2026 for those already registered that can benefit from the grandfather clause) and will see crypto firms transition to the traditional 'regulated' realm with the requirements this entails but anxiety is growing about the risk of further failures before then. As the debates in the French Parliament have shown in the past few weeks, these concerns have increased since the FTX scandal. They are shared by lawmakers who are under pressure to act to protect consumers. Regulators like the AMF and the Banque de France are also looking at stricter enforcement.
European countries have adopted different approaches, pre-MiCA. France in particular has shown relative leniency: 62 crypto firms have registered with the AMF so far – against 5 with Germany's Bafin, whose authorisation process already requires IT robustness checks. Many will be wondering whether the AMF is resourced to oversee those firms effectively. If the wind turns, and history repeats itself, France will want to be able to point to actions taken in light of FTX.
Political and policy uncertainty
France as a destination for crypto
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This blog was written by Etaine Lamy, a manager at Flint and former Associate Economist at the Financial Conduct Authority and Francois-Joseph Schichan, director at Flint and a former French diplomat.