by Jude Ayua, Associate, Crypto Policy
France’s financial regulators appear to be agreeing on a compulsory license for crypto firms in the country. The France Central Bank Governor Francois Villeroy de Galhau on Thursday 5 January called for a stricter regulatory framework for crypto companies in the country, ahead of the European Union (EU)’s anticipated Markets in Crypto Assets (MiCA) regulation. With MiCA, the EU seeks to establish a uniform regulatory regime for crypto firms operating in the EU member countries, Bloomberg reported. The MiCA is scheduled for voting in February and implementation in 2024.
Villeroy believes that the current crisis in the crypto market necessitates a licensing requirement in France: “All the disorder in 2022 feeds a simple belief: It is desirable for France to move to an obligatory licensing of DASP as soon as possible, rather than just registration,” Villeroy said during a speech in Paris on Thursday, reported Bloomberg.
In line with Villeroy, Central Bank Deputy Governor Denis Beau also said that it is desirable to have compulsory crypto license in the country ahead of the European Union’s MiCA legislation, using the collapse of stablecoin ecosystem Terra-Luna and crypto exchange FTX as reference points. (CAB has republish the op-ed here after due permission.)
The France Financial Markets Authority (or AMF) plans to collaborate with the country’s central bank and Senate to implement the compulsory license on crypto companies that are not already registered in the country, AMF Chair Marie-Anne Barbat Layani announced on Monday, 9 January, reported CoinDesk.
“The AMF, like the parliament, calls for an accelerated move to a regime of obligatory licensing for non-registered providers…,” Barbat-Layani was quoted in a tweet by the AMF.
In December 2022, following the FTX collapse, French Senator Hervé Maurey reportedly proposed an amendment to existing legislation permitting registered cryptocurrency companies to operate in the country without a license until 2026.
“The FTX collapse was a detonation [that] contributed to a moment of reckoning and awareness. This led a number of players within the French system to consider that things needed to be supervised more tightly,” he noted. The AMF Chair also mentioned this as an imperative for the license.
The amendment, which the National Assembly’s Finance Committee will discuss on 17 January, if passed, will require all registered companies to obtain a license from the AMF. By January 2023, fifty companies, including Binance, are registered with the AMF, but do not yet have a license, since it is optional.
Reactions from industry stakeholders
Reports that CoinDesk published on 10 January revealed that France’s ‘sudden’ move to impose a crypto license in the country is not embraced by all stakeholders, including certain members of the lower chambers of the National Assembly who will be jointly discussing Senator Maurey’s proposed amendment next week.
“The solution proposed by the Senate raises difficulties which will have to be looked at closely…It poses problems of method and of timing. The Senate was right to put this subject on the table,” CoinDesk reported lawmaker Daniel Labaronne saying, adding that he hopes “to arrive at a more satisfactory arrangement” than the Senate’s.
In the same report, Emilien Bernard-Alzias, a lawyer and partner at Simmons & Simmons, Paris, believes that the amendment is “premature.” “It’s very bad for the competitiveness of France…it will kill innovation…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.”
Similarly, Faustine Fleuret, president, crypto advocacy group ADAN, noted that the change is a “bad omen” for the industry and it does not take into account the existing issues in the system. “Authorities have to understand the importance of developing the sector in France,” Fleuret is reported to have said in a telephone interview. “We are very disappointed the amendment was adopted in the Senate,” she added.
The positions of the regulators—Central Bank, Senate, and AMF—point to their desire to ensure a safe and secure industry for stakeholders in the country. The concerns of the stakeholders, however, especially the urgency of the proposed license, is also worthy of note, which is something the regulators may consider.