Regulatory shifts amidst crypto rise in France

Cryptocurrency has become France’s second favourite investment, just behind real estate funds, according to a recent survey conducted by the Organisation for Economic Co-operation and Development (OECD) and published by France’s Autorité des Marchés Financiers.

The survey, which included responses from over a thousand people, found that about 9.4% of people in France have invested in cryptocurrencies. The survey also noticed a rise in younger, mostly male investors since the COVID-19 pandemic began, with over half of them investing in crypto. However, these newer investors often lack basic investment knowledge, as stated in the report.

France’s crypto surge and PACTE Act’s impact

Reportedly, the French government has shown strong support for blockchain technologies and has positioned France as a central hub for crypto and blockchain companies in Europe. This is largely due to the PACTE Act of 2019, which established a comprehensive regulatory framework for initial coin offerings (ICOs) and digital asset service providers (DASPs). According to a report, around 70 companies are registered as DASPs under this framework.

The PACTE Act mandates DASPs to register with the Financial Markets Authority (AMF) for various services such as custody of digital assets, trading, and operating digital asset platforms. Engaging in these activities without proper registration can result in severe penalties, including imprisonment and fines.

Additionally, the French regulatory framework has been recently strengthened. The AMF’s supervisory and enforcement powers have been expanded, including the ability to suspend DASPs that pose a threat to market stability. A new registration statute, effective from January 1, 2024, requires DASPs to comply with stringent regulations, including anti-money laundering, cybersecurity, and internal control systems​.

Global regulatory tensions

In parallel, significant developments in global cryptocurrency regulations, particularly in the United States, are redefining the landscape. The IRS has proposed challenging regulations for digital asset brokers, similar to traditional financial brokers, but with added complexities like cost-basis reporting. This has sparked substantial industry backlash, with over 124,000 opposition letters submitted.

The proposed regulations offer two cost basis choices – FIFO and Specific Identification, both posing significant compliance challenges. The Blockchain Association and other industry voices have criticized these regulations, arguing they exceed governmental authority and misunderstand the nature of digital assets. Concerns about the feasibility of compliance, especially in decentralized finance (DeFi), and potential infringements on constitutional rights have been raised.

Despite these challenges, some industry experts acknowledge the need for oversight to counteract fraud and maintain market integrity. The consensus is for regulations that balance transparency and privacy, ensuring the integrity and safety of digital asset transactions.

The post Regulatory shifts amidst crypto rise in France appeared first on Invezz