The Strategist

The French Ministry of Finance vs. Banque de France: Will cryptocurrencies become an apple of discord?

03/22/2018 - 13:14

French Finance Minister Bruno Le Maire intends to bring the country to the forefront of the "cryptorevolution." In particular, he told Numerama: "The revolution is on the way. I encourage you not to stand aside as spectators - it's time to take action. The industry of virtual finance is not our enemy, it will help strengthen our economy."

Following this statement, the Minister announced development of the Plan for Measures for Economic Growth and Transformation of Enterprises. In a few weeks, it will be considered by the Council of Ministers and, with approval, will start issuing licenses for issuers of cryptocurrencies. The French Financial Markets Supervision Authority (AMF) will take up the licensing.

The preliminary version of the document contains many important points. First, it is designed to "create a trust system without intermediaries with easily monitored transactions and make the economy more efficient." Secondly, it provides for the creation of "white lists" of digital assets. Presumably, this should help investors find "serious projects working on useful products" when choosing investment options. In general, Le Maire describes the country's approach as follows: "make the legislation as transparent as possible to attract innovation and eliminate threats without harm to our cryptocurrency ecosystem".

It is worth noting that France relatively late began to take decisive steps towards the cryptoindustry in comparison with other European countries. The first licensed cryptocurrency exchange was opened in Luxembourg in 2016; Lithuania is going to launch a national blockchain platform and is preparing to release the first collectible digital currency; The Swiss Financial Market Supervision Service has developed a guide to conducting ICO. There are enough examples to say that France lost leadership positions at the beginning of the race. Therefore, Le Maire’s decision to make the country the trailblazer of the digital society is not surprising.

But there is one nuance - not everyone shares the enthusiasm of the Minister of Finance. Representatives of the crypto industry, having familiarized themselves with the draft law on regulation of the ICO, called it "too good to be true." Moreover, in its March report, the Central Bank of France (BdF) urged financial institutions to refrain from any activities related to cryptocurrency. The official position of the bank states that crypto-currencies are not money or legal means of payment, but only contribute to the implementation of cyberattacks and money laundering. The document says: "The anonymity, characteristic for the production and further circulation of most crypto assets, encourages primarily their use for illegal purposes (i.e., exchange for illegal services or products), or for money laundering and terrorist financing."

In addition, BdF will support any regulatory measures prohibiting banks, trusts and insurance companies from accepting any deposits and loans received as a result of cashing in a virtual currency. Also, the office of François Villeroy de Galhau insists on banning any kind of marketing companies aimed at a mass audience and claiming that crypto assets are a real tool for financial growth.

The European Securities and Markets Authority (ESMA), a supervised department of the European Parliament, also shares a similar position. In late January, Paris supported the initiative to expand the powers of ESMA. If this happens, France's ambitions to develop the legal foundations of the cryptoindustry may not come true. Since the European Parliament includes all member countries of the European Union (plus several outside representatives), a consensus on cryptocurrency legislation is likely to be adopted soon, even if the national experience of France proves positive.

However, the position of BdF inspires hopes for positive changes - at least inside the country. It should be emphasized that AMF is an independent public body. De facto, it already controls the cryptocurrency exchanges, apparently, takes the side of the Ministry of Finance in the issue of regulating the cryptoindustry. the Central Bank is unlikely to be able to resist the two structures at the same time. In addition, BdF is connected with the European Central Bank, whose position on crypto-currencies has changed from "low priority" to "future is for digital money".