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France Demands Licenses For Non-Registered Crypto Firms

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The Financial Markets Authority (AMF) in France has demanded that all non-registered crypto firms should secure licenses.

The move comes as the financial authority joins the country’s central bank and senate in anticipating new European Union (EU) laws. To do this, they are compelling cryptocurrency-related companies to be licensed for them to continue operating in France.

In a statement on Monday, January 9, the AMF chair Marie-Anne Barbat Layani came out to support a 2022 agenda proposed by the French Senate, where the legislators were mandating cryptocurrency companies to ensure that the regulators recognize and approve their dealings as they anticipate the new Markets In Crypto-Assets (MiCA) regulation by the EU beginning October 1, 2023.

Speaking at an event, Barbat-Layani said that the AMF has joined the parliament in expediting the transition to a structure where all crypto firms see licensing as an obligation.

The AMF, like the parliament, calls for an accelerated move to a regime of obligatory licensing for non-registered providers of crypto services.

AMF Registration

The AMF registration is a simple but thorough process that entails the authority performing checks on the concerned companies, their governance, and compliance standards with anti-money laundering (AML) regulations.

Notably, several renowned companies have already registered with the French Financial Markets Authority, including Binance, the largest crypto exchange by market cap. So far, there has not been any provider that has been issued a license. Nevertheless, this is a voluntary procedure established under French law.

Based on an article published for Le Figaro newspaper, the Deputy Governor of the France Central Bank Denis Beau articulated that having mandatory licensing in the country ahead of the European Union’s MiCA law would be “desirable.” 

The title of the article is “Le monde des crypto actifs: l’épreuve de vérité”, which is French for “The world of crypto assets: the test of truth.”

In its opening paragraph, the article presents critical rhetoric, saying:

Will the year 2022 go down in history as the one that marked ‘the beginning of the end for crypto assets and decentralized finance (known as DEFI)?

These statements come as France officials reflect upon the crises that have befallen the crypto sector in the recent past, starting with the collapse of the stablecoin ecosystem Terra-Luna in May, and the implosion of crypto exchange FTX in November 2022. According to the article, while these violent tremors have probably not yet produced their full effects in a chain, they are already rich in lessons, adding that:

An important lesson relates to the general principles of organization and means, in matters such as governance, internal control, and protection of client assets, separation of activities and prevention of conflicts of interest with affiliated entities, accounting, transparency… that apply to traditional financial players, given the risks inherent in financial activities.

So far, however, the application of these principles has been very limited, according to the article, with their content coming out as being undemanding and uneven of jurisdiction for players in the world of crypto assets because it was not necessary to curb unduly the spread of the innovations they carry.

Europe To Define A New Regulatory Framework

Europe has been a pioneer in the introduction of a new regulatory framework, to ensure a fair balance between the objectives of protecting customers and maintaining financial stability on the one hand, and operational realities on the other.

The new structure is also meant to enable all competitors in the crypto market to operate based on an equal footing, without suffering the harmful consequences of actors “Rogues” as has been the case so far. It will facilitate and accelerate the adaptation of actors, installed or set up in France, to a regulatory environment that will allow them to evolve in a framework of trust for all on the path of innovation.

Beau’s article appears to be confirming reports about Governor Francois Villeroy de Galhau allegedly pushing for the change.

French Government Opposes Regulatory Amendments

The legal amendments by the Senate demanding that all unregistered crypto firms operating in France seek a license faced opposition from the French government. Accordingly, the administration’s counterargument is slated for discussion on January 17, 2023, in a committee hearing attended by the Finance Committee of the National Assembly.

Noteworthy, the EU’s MiCA (Markets in crypto assets regulation) is expected to come into effect in the Q1 of 2023, and in force at the end of the Q1 of 2024.

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