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Is France at war with crypto?

Photo of: Joseph Stone
by Joseph Stone

Last October, Bruno Lemaire, the French Minister of Economy, had already provoked many negative reactions within the crypto community following his appearance on October 18, 2020 on the French TV channel France 3 Dimanche en politique by declaring

“We need to strengthen our surveillance mechanisms to deal with the financing of terrorism. For example, cryptocurrencies must be more closely supervised,” he declared.

Although dozens of major players in the cryptocurrencies industry tried to show him that the formula “cryptocurrencies = terrorism” to which he seemed to subscribe was false, the Minister persevered in this direction and presented an order to the Council of Ministers on December 9, 2020, which imposes a whole series of restrictive measures on the French crypto industry, the consequences of which could well be catastrophic.

In his press release, the Minister readily acknowledges that “digital assets (crypto-assets) present significant opportunities for the economy”, but that their development must nevertheless take place “under the best conditions of security and attractiveness”.

In his tweet, the minister is clear: the measures will “strengthen the fight against the anonymity of transactions in crypto-actives”. Concretely, this means that cryptos and all trading platforms for digital assets will now be subject to “the obligations set by the monetary and financial code in terms of LCB-FT”. By the way, LCB-FT is not a new crypto trading pair, it just references the fight against money laundering and terrorist financing.

In fact, the French platforms will be subject to more restrictive measures regarding their KYC (knowledge of their customers). According to Capital, the new measures will force the platforms “to ask their customers for a second proof of identity in addition to their card, i.e. a SEPA credit transfer. This process will be mandatory from the first euro spent against 1,000 euros previously. The players have six months to comply”.

These regulatory constraints will most likely slow down the development of the entire French crypto industry, which will no longer be on an equal footing with its foreign competitors. Decentralized platforms that do not impose KYC or any form of registration “could well be banned from our Internet accesses for anti-terrorist reasons. This is the case for many of the DeFi protocols. This would then begin to look more like censorship than this will of protection”.

Moreover, the requirement for SEPA transfers will de facto exclude non-European customers from the French platforms. The crypto-crypto platforms (which do not use the euro) will also no longer be able to function because they do not, by essence, use traditional currencies and therefore cannot receive SEPA credit transfers.