France must mandate regulation of crypto assets, governor says

Government should not wait for EU to pass regulatory measure, Villeroy de Galhau argues

BdF governor François Villeroy de Galhau

France’s central bank governor said the country should introduce compulsory registration for digital asset companies, without waiting for a promised European Union regulation.

François Villeroy de Galhau’s words hint at impatience with the pace of the European Union’s reaction to the turmoil in crypto markets. The EU is considering passing a law that would introduce compulsory registration of crypto asset firms, but its implementation could take 18 months.

“The disruption seen in 2022 is nourishing one basic conviction,” Villeroy de Galhau said in a speech on January 5. “France should switch as soon as possible to the compulsory authorisation digital asset service providers rather than simply requiring their registration.”

There was turmoil on crypto asset markets in 2022, with major exchange FTX collapsing and several widely traded digital assets losing most of their value.

The European Parliament is due to vote in February on whether to adopt the draft Regulation of Markets in Crypto Assets, or Mica. If it did so, the governments of European Union member states would then also have to decide whether they would approve the regulation. It typically takes the EU 12 to 18 months to implement a financial regulation once the parliament and member states have decided to adopt it.

But Villeroy de Galhau said that France should introduce compulsory legislation without waiting for EU countries to introduce the measure. “This needs to happen well before Mica enters into force, to create the necessary framework of trust,” he said.

The BdF’s first deputy governor, Denis Beau, said in a speech on January 6 that compulsory registration of digital asset providers would be “a good idea”. He said it should help fintech companies setting up in France “to adapt more rapidly to a regulatory environment that allows them to innovate within a framework of trust”.

France and several other European Union countries have a regime of voluntary registration for crypto firms. The French parliament passed the “Pacte law” in May 2019. Among other measures, this allowed digital asset providers to apply for optional licences for themselves and for specific online tokens they issued.

Under the law, France’s Autorité des marchés financiers can grant licences, referred to as visas, to firms and tokens. The law says assets must be utility tokens, which it defines as digital assets connected to a distributed ledger technology. But the law excludes digital assets that that qualify as financial instruments under the EU’s Second Markets in Financial Instruments Directive.

Vote on regulation delayed

The European Parliament was initially due to vote on Mica in December, but it announced in November that it would be delaying the vote. Several media outlets quoted sources close to the decision saying the delay was caused by difficulties in translating the regulation into the EU’s 24 languages.

The main body of the Mica regulation runs to 168 pages in English, with a further 19 pages of annexes.

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