Even after the trends evolving the cryptocurrency traction throughout the world, the industry remains unregulated in France. In 2020, the regulators have tried to apply two ordinances that contain the provisions on blockchain technology, but it seems to suffer from less engagement. Now the government has set up numerous fact-finding missions that will establish a regulatory framework for the cryptocurrencies. However, French regulatory bodies are generally wary of cryptocurrencies due to its unpredictable nature, while blockchain technology has drawn complete attention. At the beginning of the year, French authorities have announced limited guidelines relating to the tax treatment of cryptocurrencies, published the norms depicting the profits generated from its sales are taxable. Lastly, the total value will be concerned while reviewing the wealth tax.
Another biggest step observed is the new regulations for crypto firms by the regulators. French authorities bow down in normalizing the crypto-transactions following the strict licensing requirements for DASP (Digital Asset Service Providers). We can see the regulators getting an impression of EU renewed anti-money laundering policies.
Effective from January 1, 2020, the French financial market regulator, AMF ( Autorité des Marchés Financiers), has released a set of norms for licensing digital asset service providers (DASP). In these rules, the country will follow the newly launched anti-money laundering directive (AMLD-5), set by EU member states. As per the instructions, it is needed to be integrated into the national law while conducting the policies.
In France, the AMF classifies the DASP standards that has to offer at least one of the mentioned services, including;
- Managing digital asset portfolios
- Trading digital assets in exchange for digital assets
- Buying or selling of digital assets in exchange for fiat currency
- Providing advice to investors interested in digital assets.
While the firm provides digital asset custody services through legal tender in France, they must get registered with the AMF for buying or selling digital assets.
AMF practice strict regulatory requirements on DASP’s
The AMF manages to play a vital role in publishing the strict rules for DASP’s as compared to those imposed on the other financial providers. The regulators clarify the differences while pinpointing the increased level of necessary cybersecurity risks of crypto-businesses. To maintain the required concern, it is necessary to attain a license for which DASP’s must show;
- A two-year business plan,
- A well-managed cybersecurity program describing measures that help to mitigate risks, compliant with European data privacy laws,
- A plan of its internal control systems,
- A genuine list of digital assists offered by the firm,
- A systematic IT plan,
- A full-proof procedure depicting the handling of insurance claims,
- A required plan seeking measures against money laundering and terrorist financing,
- At least one senior manager,
- Lastly, the firm’s geographical location.
After the issue of license, DASP has to undergo the mandatory technical audits to ensure that their cybersecurity remains constant and safe. The application process of DASP licensing involves submitting the mentioned documents and proof that the participating DASP has a minimum amount of reserve funds or professional indemnity insurance.
Lack of Pan-European regulatory approach
Mostly all European countries across the board have been working on following and implementing crypto regulations. France has been witnessed making gradual progress in accepting cryptocurrency regulations. Last year, the AMF published its first “ICO Visa” to a cryptocurrency fundraising platform. At the same time, Germany announced its newly passed legislation collaborating with BaFin (Federal Financial Supervisory Authority) allowing banks with a license for selling and storing cryptocurrencies with the same approach of handling bonds and stocks.
Regulations of crypto firms are important for the development of the asset class, as they provide certainty on the legal basis for growing businesses and investors. Europe stood firm in regulating the vital norms understanding the urgency for regulations for the financial condition of the market. France is adopting the culture at a slow pace, which makes the authorities pressurized in implementing vital steps. So far, they still lack a Pan-European regulatory approach.
A brief about optional ‘Visa’ for ICO’s
There is no obligation for the ICO issuers to apply for a ‘visa” from AMF, apart from their ability, in return for filing an information document, offering transparent communications to the public, and complying with anti-money laundering (AML) duties. It allows users to solicit investment and gives free access to a bank account without any chaos. It is important to announce the practice as several banks have directly refused to open accounts to issuers or closed the existing ones in the crypto environment. However, potential investors are quite safe from the action as without a visa, and an ICO cannot perform the function to solicit investments in any case.
Conclusion-
According to AMF, and custodian wallet providers and crypto-fiat exchange providers are required to register with the authority. As France has imposed the AML-Directive, now the regulatory bodies need to comply with a set of strict rules that must include preventive provisions in terms of anti-money laundering.