Enhancing Cryptocurrency Regulation in France
In a significant move to enhance the regulation of cryptocurrency, French officials are advocating for crypto exchanges to take on liability concerning certain incidents related to decentralized finance (DeFi) platforms. As part of their proposed amendments to the European Union’s Markets in Crypto-Assets Regulation (MiCA), French authorities stress the importance of due diligence from crypto-asset service providers (CASPs) when connecting customers to DeFi protocols.
Proposals and Responsibilities
Released on Wednesday, the proposals were developed by a collaboration of France’s Treasury, the Financial Markets Authority (AMF), the central bank, and the Prudential Supervision and Resolution Authority (ACPR). The officials outlined that CASPs should bear responsibility for client matters where they have facilitated access to protocols without proper vetting or have neglected known security threats.
Currently, MiCA exempts fully decentralized crypto services from such regulatory oversight, but the new proposal aims to bolster investor protections by imposing obligations on regulated platforms, which include:
- Vetting DeFi protocols
- Monitoring activities for potential risks and vulnerabilities
Furthermore, the proposals advocate for the certification of these protocols and smart contracts, alongside establishing liability for exchanges in case of incidents. The requirements will apply especially to larger CASPs while smaller providers would have responsibilities tailored to their scale. Importantly, platforms can still offer access to non-certified protocols if they perform diligent evaluations and communicate associated risks clearly to customers.
Consultation and Future Directions
In addition, the French authorities urged the European Commission to reassess the scope of MiCA, as it seeks insights on the regulation of DeFi activities that extend beyond the original framework. As the consultation aims to shape a report for EU legislators by June 30, 2027, these developments are critical in determining how the evolving crypto landscape will be governed.
Regulation of Non-Custodial Wallets and CASPs
The officials also commented on the regulation of non-custodial wallets, proposing that developers should not be subjected to mandatory certification. Instead, they suggest a voluntary certification option for advanced wallets that offer DeFi functionalities. Beyond the realm of DeFi, France is pushing for a shift in oversight of significant CASPs from national bodies to the European Securities and Markets Authority (ESMA), as well as recommending an adjustment to MiCA’s current threshold for categorizing significant CASPs from 15 million average daily active users.
Reevaluation of Token Classifications
Furthermore, French authorities have called for a reevaluation of the asset-referenced token (ART) classification under MiCA, noting the absence of authorized ARTs and advocating for changes in the e-money token (EMT) framework to encompass multicurrency stablecoins. These comprehensive recommendations underscore France’s proactive approach in addressing the regulatory challenges posed by the rapidly evolving cryptocurrency sector.
