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After weeks of French officials calling for tougher crypto regulations in France, a new regulatory regime on crypto companies is set to vote in the country’s National Assembly on Tuesday night.
French legislators are debating whether to introduce mandatory licenses for digital asset service providers before EU-wide regulations come into effect towards the end of 2024.
Social-liberal senator Hervé Maurey originally proposed that digital asset companies get a mandatory license by October this year. This received a cold reception from the crypto industry, as not a single company obtained the hard-to-get accreditation, which is currently optional.
“FTX’s recent bankruptcy highlights the risks inherent in any investment in crypto assets, especially when companies operate outside of any regulation,” Maurey write in the text accompanying the amendments he introduces a broader bill that changes EU law. In addition to the Maurey amendment, the National Assembly will consider two other matters: one that will delay licensing deadlines, giving companies more time, another that will replace mandatory licenses with simpler registrations.
AMF Registration
Currently, companies offering crypto services in France choose to register with the financial regulator, the Financial Market Authority (AMF), instead of getting a license. 60 companies currently in list, meaning that the French government considers them professionally competent and complies with anti-money laundering laws. The list includes Binance France, a local subsidiary of the global crypto giant, and Société Générale, one of the country’s leading banking groups.
However, to obtain a full license from AMF, companies need to secure minimum liability or equity insurance, establish internal controls, and follow cybersecurity protocols along with other organizational requirements. No company has yet achieved this.
With an industry boost, liberal-centric Senator Daniel Labaronne proposed an alternative amendment last Friday, suggesting that a more general registration process could improve further measures on consumer protection and corporate control to be complied with by crypto companies under the auspices of the AMF. These steps will be more achievable than with a high-level license.
Earlier last week, Labaronne also proposed moving the license deadline to January 2024 instead of October 2023, to buy the industry more time. This leaves three possibilities for new national legislation on crypto companies that policymakers will determine during Tuesday’s vote.
Bridge to MiCA
The latest amendment by Labaronne is the lightest option for the French crypto sector. It also builds company competence against the provisions suggested under the EU Market on Crypto Asset regulation, which will become a requirement in the coming years, Faustine Fleuret, head of French crypto advocacy group ADN, told The Block.
Enhanced registration options include governance requirements, reporting to regulators, and segregation of funds — all covered by MiCA, that is expect to vote final in April.
“This proposal is a step in the right direction, both to effectively protect investors and to preserve the dynamics of innovation and business creation in France,” said Fleuret.
Fleuret is also concerned that the AMF lacks sufficient resources to address the influx of crypto supervision, especially if stricter amendments that expedite mandatory licensing pass in the National Assembly. The French regulator is still building capacity to oversee the crypto sector.
“The resources allocated by the AMF to process these files are continuously increasing and the AMF will continue to mobilize the necessary resources to carry out this mission,” said an AMF spokesperson, referring to a possible acceleration of permits.
Whichever amendment passes, registered companies will be able to continue operating until the end of the transition period that MiCA is offering, most likely in early 2026.
Tighter regulations
The push for tougher regulations for crypto companies was a common call to action from policymakers in the aftermath of the FTX debacle. At the European Parliament, the European Parliament urged regulators to accelerate the implementation of MiCA. Regulators quickly eliminated this would be a viable possibility.
The AMF joins a chorus of French policy makers and central bankers in supporting the acceleration of crypto licensing in response to the November crash of the crypto exchange giant.
“The crypto realm must now make a clear choice to embrace regulation and investor protection. It is for its own sake as one scapegoat can easily ruin the reputation of the entire industry,” said AMF Chair Marie-Anne Barbat-Layani earlier this month. “The AMF, like the French Parliament, is calling for an accelerated transition to mandatory registration of currently unregistered service providers.”
Disclaimer: Starting in 2021, Michael McCaffrey, former CEO and majority owner of The Block, took out a series of loans from FTX and Alameda founder and former CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose the transaction.
© 2023 Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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