How the French financial center is taking on crypto

The dividing lines are gradually blurring between them TradFi AND crypto financeeven if obstacles remain. Tokenization AND security arguments open appetites anddigital euro may facilitate its approval. Expert adviceAFG, Bpifrance, CACEIS AND Oddo BHF.

Jean-Marc StengerCEO of SG Forgeexplained in an interview: marketing first tokenized financial products IN Europe it will go through three phases. The first is the organization of transactions. This phase is already underway. The following will be based on Pilot Plan.

The final stage will be the transition of entire sections of the markets to blockchain. The approval of central bank digital currencies will be one of the boosters. Other engines will be needed. And these are starting gradually, as illustrated by experts in traditional and crypto finance gathered at the conference AM Tech Day 2022.

Tokenization options

Among the players in asset management, represented byFrench Association of Financial Management (AFG), crypto and blockchain are subjects of long-term interest, as evidenced by the president of its technological innovation commission.

This is a topic that we are following closely”, declares Muriel Faure.

The organization also plans to address the topic again crypto in November as part of a dedicated white paper digitalization of management funds. And when this industry projects itself for 5 to 10 years, it predicts the place it will occupy asset tokenizationit is judged that it was creating strong opportunities.

In order for these opportunities to materialize and to encourage investments, brakes, “psychological, real, fiscal as well”, however, it will have to be removed. This is to facilitate transactions in Bitcoin“which offers the greatest liquidity”, but not only, or even as a priority.

The opportunities are even greater for the tokenization of assets”, insists the head of AFG.

However, private investment is encountering obstacles, even though Pact law in principle authorizes allocations to crypto funds. The problem: the latter, for example on life insurancecannot find distributors and these products remain restricted to professional customers.

We have to overcome blockages, including that of distribution by insurance companies”, points out Muriel Faure.

Therefore, management companies are working on it. Cultivation operations should be added to these actions, especially with risk departments and banking advisors.

Crypto adoption on TradFi is driven by customer demand

This task of acculturation, e Oddo BHF bank developed it within a few years and with different functions of its organization. This phase started 4 years ago in partnership with Consensys through the “zero to crypto” project, says Alexis Le Portz, the company’s chief innovation officer.

This project helped us explain what a token and a blockchain are, what their uses are and how they can interact with internal systems, then start to calm down,” he continues.

The results waited until 2022 to emerge, specifically through a decision shares in Coinhouse. Others are expected, for example through partnerships.

of volatility of bitcoin it’s both an asset and a disadvantage, Oddo’s head notes. A Franco-German and Swiss bank, it also has to deal with three separate regulatory frameworks. On the other hand, it can count on the conviction of its leader Philippe Oddo and on the interest of its customers.

Crypto adoption is a journey, often starting with customer demand, as with CACEIS through a management company and a family office, its digital director, Arnaud Misset, testifies.

Our clients, including one in particular, have asked us to act as custodian, custodian and fund administrator. Custody is not with us at the moment. The service is under development and will open at the beginning of 2023″, he announced.

Tokenization and security tokens are on the rise in CACEIS

In this view, the financial player will join forces with him Taurus for holding private keys of assets. CDO of the banking institution, a subsidiary of Crédit Agricole and Santandertherefore observes the developments and an expansion of the scope of crypto.

The change is quite clear. Two to three years ago, we were only talking about cryptocurrencies. Today, at least a quarter of our requests are about tokenization and security tokens. We see that the market is changing and changing rapidly.”

The pace of this the transformation moreover it replaces that of regulationswhich does not constitute without hindrance.

It is necessary that the established regulations bring comfort, trust and calmness [conseillers et équipes risques] (…) My only fear is the very long duration of these regulations”, underlines Muriel Faure, referring to the pilot regime and Mika with possible deadlines in 2029 and 2025.

Therefore it is a priori difficult to agree long regulatory times and very short times of innovative fields as crypto. To gain a foothold in crypto in this context of legal uncertainty, Oddo BHF has chosen, in the short term, to invest and create partnerships with a specialized partner. The house of coins.

For its other initiatives, the bank aims for the medium and long term. “What’s tricky is explaining that it won’t be not for 2023. It is a reality that leaders, perhaps a little far from the operational and technological subject, have difficulty understanding”, says Alexis Le Portz.

Europe must nurture pragmatism in crypto

Nor does the fragmentation of regulations facilitate this understanding. Various digital assets (crypto-currencies, CBDC, NFT, security mark, etc.) depend on specific legal frameworks. For more, custodian of cryptocurrency raise critical issues in the fight against money laundering and terrorist financing. Solutions like that of chain analysis however, it appeared on the market to address these issues.

At the custodial level, the topic is no longer about the operational and technical part (…) but much more about the aspects of risk and compliance where the discussions remain open for many points… and can last for a certain time”, reacts. Arnaud Misset of CACEIS.

Ivan DeLastours also warns of a prisoner’s dilemma, which could affect Europe. “The crypto planet will go where it can be expressed,” says the crypto and blockchain pilot Bpifrance. However, the “pragmatism” of American institutions and regulators today favors the rise of this industry in US.

We are at a crossroads. I hope that we will make the right choices and find a European way to achieve an intelligent synthesis, as has been done in other topics”, asks the Bpifrance specialist.

Digital Euro in bulk: “a booster”

AFG representative sees in Mika a step in that direction. However, the financial industry has other expectations, including CBDC. Moreover, Muriel Faure welcomes the work of the Banque de France in creating one wholesale digital euro in 2023.

This is an essential element for the success of the pilot projects for a seamless solution (…) It will be extremely decisive and a driver for the development of the use of blockchain and crypto-assets”, she argues.

This analysis is shared by Arnaud Misset. “We look forward to it central bank digital currencies “, he says. CBDC, for lack of use in Europe of stable currencyit is essential to merge the parts of cash and securities on the blockchain and thus allow a change in market finance.

The sector also needs one secondary market to grow, warns CODO CACEIS. However, the secondary, and the liquidity it brings, is not expected for three to five years. Arnaud Misset also calls to bring back the question ofINTEROPERABILITY “at the heart of the debate,” starting with that between CBDCs and existing stablecoins.

In conclusion, Ivan De Lastours encourages European leaders to invest in technological capabilities, as the United States has been able to do with Chainalysis, “an intelligent database of all crypto transactions. It’s a real war chest.”

They took risks and wrote blank checks to produce champions (…) We should too [Ndlr : l’Europe] that we invest in tools to have our technical capacity (…) This is a European issue.”

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