The governor of France's central bank has advocated strict crypto regulations in the country, following a trend of global countries changing their regulations. He stressed the urgent need for such regulations to protect consumers and prevent financial crime.
France's central bank governor Francois Villeroy de Galhau said market volatility was a reason to introduce a mandatory licensing regime "as soon as possible".
The recent FTX bust in November of last year has worsened the situation in the crypto industry as it caused many investors to change their views on virtual assets, and the turmoil in the crypto market caused by the stock market collapse caused many countries to apply stricter regulations.
The European Union has decided to draft comprehensive crypto regulations in 2020 to meet the ever-changing needs for crypto regulations. However, the Markets in Crypto Assets (MiCA) law is not expected to come into force until 2024. Therefore, European crypto companies can legally operate without acquiring a license until the MiCA regulation comes into effect and establishes a licensing regime.
France issued strict crypto licensing regulations following the FTX episodes. This led to a decrease in the number of cryptocurrency exchanges in the country.
The French finance minister wants to scrap the clause that would require crypto companies to obtain a DASP license to operate in France. He suggested making it mandatory for every crypto company to obtain a DASP license.
He noted in a statement:
All the turmoil in 2022 feeds the belief that France should move to mandatory DASP licensing as soon as possible, rather than just registration.
In France, obtaining a DASP (Digital Assets Service Provider) license is currently optional. The EU Parliament has exempted crypto companies from licensing until 2026 when EU crypto rules will see a new licensing regime.
The governor wants to change the way crypto platforms are managed to save them from bankruptcy and give the Financial Markets Authority more control over these companies. So far, around 60 crypto companies have registered with the Financial Markets Authority, but they have yet to obtain a DASP license.
Cryptocurrency companies wishing to operate in the United States must obtain a DASP license. This license will oblige platforms to disclose more detailed business information to eliminate risks.
In December 2022, the French Finance Commission proposed an amendment to French tax law. The change would allow companies to deduct their research and development expenses from their taxable income. This would incentivize companies to invest in R&D and help them compete with foreign companies.
The governor is not the first to criticize the clause that allows crypto companies to operate with minimal regulatory interference. In light of the FTX crisis, Hervé Maurey, a member of the Senate Finance Commission, had already proposed in December last year to remove the clause that allows crypto providers to operate with little regulatory intervention until 2026.
Speaking to the Financial Times in mid-December, Hervé Maurey said tighter regulation of cryptocurrencies was needed to prevent them from being used for money laundering and other illegal activities.
The collapse of FTX was a detonation that contributed to a moment of realization and awareness. This has led a number of actors within the French system to believe that things need to be monitored more closely.