Cryptocurrencies: a European squeeze that should benefit the sector

On the one hand, the bitcoin challenger accompanied by a crypto ecosystem that dreams of disintermediate currencies. On the other hand, the great power, Europe, with its sovereign currency, the euro, which protects stability. Suffice it to say, the dialogue hasn’t always been fluid. After months of very heated exchanges, both sides have nevertheless managed to find a compromise to live in harmony. Regulations Mika (The crypto-asset market) and FRR (Regulation of the transfer of funds) were approved on October 12 by the Economic Committee of the European Parliament for implementation until the beginning of 2024. With them, new rules of life for cryptocurrencies, after two years of difficult discussions.

The TFR imposes stricter traceability of exchanges to combat money laundering or the financing of illegal activities. MiCA, for the most part, meanwhile, brings the consumer protection obligations of crypto businesses closer to those of the banking world. Their liability, for example, will be engaged in case of loss of crypto-assets belonging to investors, which was not the case until now. Which paves the way for legal proceedings and compensation. Any new “crypto” launched on the mainland will also need to be thoroughly studied by the regulator.

A necessity for the European Union. First, due to the proliferation of crypto-assets since the Covid-19 crisis (according to a study by the European Central Bank, almost 10% of the population of Western Europe would have some kind of cryptocurrency bitcoin Where ethereum). Then above all because the scandals have multiplied, with an economic crash spectacular in the spring, multiple bankruptcies like the Terra projector scams and hacks that have lost millions of euros to it small carriers no possibility of appeal.

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“France is a country where the rules are clear”

However, this turn of the screw could also benefit the crypto sector itself. It’s counterintuitive, but a tighter regulatory framework can actually generate investment. “France has already been there with the Pact law vote in 2019, the birth of the service provider status for digital assets, which many players feared. Finally, what we see today is that France is a country where the regulations are clear and for some players, it is good to settle there,” says an expert in the crypto sector. The biggest players in the sector also seem to be looking at these new regulations with confidence.

Eric Anziani, the head of Crypto.com, announced this week an investment of 150 million euros in France and made Paris his European headquarters. The Singapore-based firm has just registered in France as a PSAN (digital asset service provider) with the Autorité des marchés financiers (AMF). “Compliance in every country costs a lot of money every time,” recalls Eric Anziani. The new framework is therefore, in his eyes, a step forward for the continent in terms of “clarity and harmonisation” of laws, which makes the wider EU market more attractive. And he is not the only one who makes this analysis. Its direct competitor, cryptocurrency exchange platform Binance, recently pledged to invest $100 million in France.

“MiCA helps define the different types of crypto-assets, the conditions under which a cryptocurrency issuer can operate. This is likely to strengthen confidence in their use. At the same time, these rules give respect and a framework harmonized legal. for companies in the big market that is the EU. It is phenomenally positive”, analyzes Frédérick Lacroix, from Clifford Chance. According to the lawyer, cryptocurrency can, as a result, inject more into the traditional economy. “We can expect that banks and insurers to be able to offer crypto services themselves. Because they will be able to work with service providers subject to the same regulator,” predicts the expert.

For smaller companies, the equation is of course a little more delicate, because the compliance imposed by MiCA and TFR will come at a cost. This legal certainty should still benefit those who manage to pass this milestone, “facilitating fundraising and allowing them to stand out from their competitors”, assures Franck Guiader, expert in digital finance and innovation regulation at the firm. legal Gide.

bitcoin saved

This era of regulation is finally getting off to a smoother start than expected. Initially, some provisions questioned the very foundation of cryptocurrencies. A first version specifically envisioned banning “proof of work” (proof of work) in the name of fighting global warming, which would have doomed bitcoin and many other assets based on this. energy-intensive authentication. Finally, companies will simply have to declare information about their environmental and climate footprint.

The final version of MiCA also excludes most NFTs – those non-fungible tokens that have entered the art world – as well as DeFi, decentralized finance. “Consumer law on NFTs, or those governing financial markets, is already sufficient for most crypto-related use cases,” comments Franck Guiader.

The only big losers: stable currency, severely suppressed by MiCA. These cryptocurrencies, whose value does not fluctuate thanks to their reliance on fiat currencies such as the dollar or euro, are closer to common means of payment. This inevitably threatens the “monetary sovereignty” of the European Union, the regulator insists. Therefore, the issuance of these tokens will be limited and their reserves of value will be particularly controlled. The downside at this level is that strong stable currencies, including one in the euro, are already flourishing across the Atlantic, outside of any regulatory framework. “There is a risk of seeing the development of an “off-shore” euro market, with large European companies trading between euro/dollar currencies. We are in the process of losing an important economic and commercial weapon,” warns Frédérick Lacroix. . of the Clifford Chance firm. However, MiCA is not fully regulated. Many additions are expected during the 18 months of implementation. With, perhaps the key, new developments.


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