How Does France Plan to Deal With Cryptocurrencies?

A top regulator has filed a lawsuit against Binance Holdings Ltd, a virtual-currency company that threatens to engulf several trading firms with its collapse, closing several crypto-friendly banks, and now it appears that virtual-currency entrepreneurs are feeling the heat in the US. The vibe is different in Europe, particularly France, where tech bros are more likely to receive the red carpet treatment than they do in the rest of the world.

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There are many of them, including Jeremy Allaire, co-founder of Circle, a stablecoin issuer. According to him, the shifts in regulatory oversight within the crypto sector have been a game of Thrones — where you must win or you will die — on the sidelines of Paris Blockchain Week in the luxury surroundings of the Pavillon Vendome. The company, which played a prominent role in the Silicon Valley Bank crisis when it attempted to withdraw $3 billion from the bank, is now planning to double down on Europe by applying for multiple licenses in France, a country that, in Allaire's words, is one that is "forward in innovation," as he is wearing a suit and tie that is suited to regulators.

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The Hard Knocks Come After The Hype

Emmanuel Macron's administration is not the only one seeking to be a crypto hub - Allaire was recently in London as well - but its rhetoric has much in common with the view that crypto is part of a broader competition to attract businesses, and as such, it shares some of its values. I moderated a blockchain conference in London recently where French officials urged investors to set up shop in France for several reasons, including labor market reforms, tax cuts, and a larger continental banking sector in the post-Brexit era. As of right now, around 50 digital asset firms have registered with the regulator while domestic players such as Kering SA are still experimenting with the metaverse.

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Despite the faded hype, Paris hopes to attract techies and coders relevant to potential disruptions in the future. Despite the crypto risks that have been on display for quite some time, new rules have strengthened faith that the European Union can reduce them. The EU's supervisory framework for digital assets, MiCA, comes into force in 2024 and covers multiple tokens, including stablecoins. For this reason, Circle is looking forward to the growth of its new euro-backed token. AMF, a French regulator of the financial markets, said in January that it was open to innovation, but that crypto-related ventures now needed to choose a regulatory path.

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When something goes wrong, you run the risk of overconfidence. As a result of nervous French lawmakers' pressure on Macron, the NFT sports app Sorare and the registration process for digital asset firms have been tightened since FTX's dramatic collapse. Earlier, Binance was accused of regularly breaking derivatives rules by the US Commodity Futures Trading Commission. According to Senator Herve Maurey, who has called for tougher rules, "Improving our business attractiveness is not the most important thing...investors need maximum security." (Binance disagrees with the characterization of allegations and says the complaint is incomplete.)

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Continent of the Old Crypto

A financial scandal or financial scandal in France or Europe is probably the last thing that Macron needs, given that there is no parliamentary majority in France and where there is no parliamentary majority in France. As lawmakers watch the NFTs' money-laundering risks, they are keeping their guard up. The crypto industry is focusing less on the canapes and keynote speeches and more on the basics of survival — including how they can find banks that will accept them as a customer. Francois-Joseph Schichan of Flint Global says that the environment has become more unstable than it was a year ago.

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The journey of Circle's Allaire may appear to be just a beginning of a journey toward the acceptance of tokens like the digital dollar and euro proxies his company provides. Citigroup Inc. believes that central banks by 2030 could well issue $5 trillion of circulating digital currencies, which would put an end to crypto-Wild West. This seal of approval from state institutions could well help to end the crypto Wild West. For Paris, it's perhaps a calculated gamble, since even if LVMH Moet Hennessy Louis Vuitton SE doesn't make any progress with its virtual handbags, France will still be able to export the actual handbags that they sell.

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In spite of this, even technooptimist leaders like Macron will be acutely aware of policy risks which seem to favor the privileged at the top over those at the bottom, and will be influenced by the global sports-betting boom at a time when angry protesters are fighting perceived inequality as a result of top-down pension reform. This includes a risk of an unexpected, digitally driven banking crisis, affecting both the top and the bottom. Should they eat crypto? Maybe not.