France to end soft licensing regime for cryptocurrency companies

The digital assets space continues to come under pressure on multiple fronts following the failure of the FTX exchange. Once touted as the “cryptocurrency haven” of Europe, France is now moving forward with its plans to strengthen the regulation, oversight and supervision of cryptocurrency companies.

A member of France’s Senate Finance Committee said the country needs to reconsider its easy licensing regime for digital asset providers. Hervé Maurey, who chairs the regional planning and sustainable development committee, has proposed an amendment to existing legislation to remove a clause that allows crypto platforms to operate without a full regulatory license until 2026.

Maurey has called on lawmakers to start working on new cryptocurrency regulations to protect the financial system after the FTX exchange crashes. He suggests tightening the grip even before tougher EU rules come into effect in 2024.

The much-debated Markets in Crypto Assets bill, or MiCA, includes a 12-18 month adaptation period to prepare for new laws in place, meaning the laws could fully take effect in early 2024 at the latest. soon. The EU-wide regulatory framework will ensure passporting rights for crypto companies working across the continent.

The president of the European Central Bank, Christine Lagarde, has also called for MiCA II to regulate activities related to cryptocurrency staking and lending. The term refers to additional legislation based on the work done by legislators for the original bill.

Reflecting on the sudden implosion of FTX, the head of the ECB said the incident was more about the exchange’s “stability and reliability”. However, he shows the need for proper regulation of cryptocurrencies before digital assets cause wider economic damage. Lagarde was also concerned that cryptocurrencies will eventually grow to the point where they become a risk to financial stability.

France’s current Pacte law includes a very wide range of measures that cover many aspects of all crypto-active players. Laws require cryptocurrency exchanges and custodian service providers to undergo a mandatory MFA registration and obtain a certification issued by the French watchdog. The top French regulator has confirmed that it is already involved with other cryptocurrency-related operators such as exchange platforms, custodians and asset managers.

However, current rules allow digital asset providers to operate in the country without obtaining a full-fledged licence, meaning they can provide their services with minimal controls.

Previously, France introduced its own guidelines governing ICOs and similar token sales in early 2018 and then proposed legislative changes to put cryptocurrency-related entities under the legislative purview of its financial watchdog.

Furthermore, the framework provides for heavy penalties for those who fail to comply, but will not reimburse investors for their losses as is the case with compensation funds that cover traditional investments.

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