The head of France's central bank reports the need for licensing cryptocurrencies ahead of EU cryptocurrency regulation laws.
Uncertainty in cryptocurrency markets proves the need for an early adoption of compulsory licensing for cryptocurrency firms.
The head of the Bank of France has called for stricter licensing requirements for cryptocurrency companies in France, citing the current turmoil in the crypto markets.
During his Jan. 5 speech in Paris, Francois Villeroy de Galhau said that France should not wait for the upcoming EU cryptocurrency laws to impose mandatory licensing for local digital asset service providers (DASPs).
The European Parliament's Markets in Crypto Assets bill (MiCA), which provides for a licensing regime for cryptocurrencies, is expected to come into force no earlier than 2024.
Villeroy de Galhau believes that the reasons for the collapse of many crypto businesses in 2022 was the lack of clear regulation of digital assets. Therefore, it would be desirable for France to move as soon as possible to compulsory licensing of DASPs, rather than just registering them.
Currently, crypto-businesses that provide crypto-trading and storage have to be "registered" with the Financial Markets Authority (AMF), the country's market regulator.
A DASP license is optional. Those companies with a license have to comply with a lot of requirements related to business organization, conduct and financing, which makes them less competitive compared to those which do not have such licenses.
For this reason, licensing seems unattractive to businesses. Of the 60 AMF-registered crypto firms, not one currently holds a DASP license.
This statistic illustrates just how popular licensing is among crypto businesses.
In December, Senate Finance Committee member Hervé Maurey proposed an amendment to remove the clause allowing companies to operate without a license.
Current French laws allow firms to operate without a license until 2026, even if MiCA comes into force and establishes a licensing regime.
Parliamentary discussions on the amendment will begin in January.
Cryptocurrency regulation has been making its way through the EU parliament since September 2020.
On Oct. 10, the framework for regulating digital assets was adopted by the European Parliament's Economic and Monetary Affairs Committee, as the result of negotiations between the EU Council, the European Commission and the European Parliament.
The final plenary vote on MiCA was postponed from late 2022 to February. The reason for the delay in regulating cryptocurrencies was the "enormous amount of work for legal linguists, given the volume of legal text.
However, the 2022 crash of FTX and other major cryptocurrency investment funds forced lawmakers to rush their decisions in order to protect the rights of cryptocurrency investors and prevent similar crashes and bankruptcies in the future, as they affect not only the cryptocurrency industry, but also the stability of the state's financial system as a whole.