Hi, This is Qadir A.K, Crypto lover, and Research Columnist.
Bienvenue dans ma série d’écriture!!! Today we will have the Tour de France. Welcome to my writing series ‘The Cryptocurrency Breakthrough 2020 – Synopsis 14’ Cryptocurrency Regulations in France.
France is one of the world’s modern countries and projects itself as the leader of the European Nations. France is among the nations that realized the importance of blockchain technology and cryptocurrencies and laid out a work plan to develop new innovations.
Government’s Attitude towards Cryptocurrency
Cryptocurrencies have a positive approach in France with necessary regulations on them. They are examined by the regulatory bodies of France, Authority des Marches Financiers (AMF), French Prudential Supervision and Resolution Authority (ACPR), and Agence Nationale de la Securite des Systemes information (ANSSI)- the cybersecurity agency of France.
Major projects have been launched in France using the blockchain technologies which led the future of the french cryptocurrency. For example, Tezo, which is a blockchain network linked to a digital token, tez or tezzie. The French army revealed the fact that it was using Tezos blockchain to authenticate its judicial expenses.
The France regulatory authority, AMF initially had a very suspicious stand on cryptocurrencies and they had blacklisted some of the crypto websites too. But now it has changed its position with respect to the digital assets and ICO’s.
The French minister Bruno Le Maire stated that the government is in full support of the blockchain and crypto sectors.
“France will not miss the Blockchain revolution,” he added.
Regulations on Cryptocurrencies
The AMF has released new rules for the digital asset service providers called PACTE law which is in-line with the EU 5AMLD. The AMF requires digital asset service providers to offer at least one of the below-mentioned services,
- Digital asset custody service
- Buying or exchange digital assets in exchange for fiat currency
- Trading digital assets in exchange for the other digital assets
- Managing digital asset portfolios
- Providing advice to investors interested in digital assets.
Registration with AMF is mandatory if the service provider offers custody service and also encourages buying or selling digital assets for fiat currency. To register with AMF the service providers need to exhibit the following,
- A cybersecurity program which demonstrates the measures could be taken to combat risks.
- A two-year business plan.
- A list of digital assets, the provider wishes to offer.
- A plan of the internal control system.
- Its insurance claims procedure.
- An IT system plan.
- The plan to prevent money laundering and terror funding.
- The geographical location
- At least one senior manager.
With the application for registration, the service providers also need to submit indemnity insurance or a minimum amount as reserve funds. Once the service provider gets registered, technical audits will be conducted to ensure cybersecurity is prioritized on top.
France, after becoming the first countries to authorize the registration and transfer of cryptocurrencies, now has adopted a new legal framework called Business Growth and Transformation law (PACTE) law.
With the aim of being at the forefront of blockchain technology, this law governs the digital assets or cryptocurrencies, digital asset service providers or exchanges and the ICO’s.
Taxation and Mining
Taxes on Cryptocurrencies
France collects taxes on the gains from cryptocurrencies in two scenarios, first, when gains are earned by trading and mining of cryptocurrencies, the progressive income tax is charged with about 45% and additional social contributions.
Secondly, the companies which deal with cryptocurrencies, the profits will be subjected to corporate gains tax of 33.3% which will be gradually reduced to 25% till 2022.
Mining of Cryptocurrencies
Cryptocurrency mining is permitted and not much regulated in France. However, the profits generated by mining cryptocurrencies are taxed under the progressive income tax which is about 45% of the gains.
Series of Events
10-04-2020:- The Bank of France announced its experiment program on the Central bank digital currency.
22-01-2020:- French regulators publish new rules for crypto firms effective from 01-01-2020. The new rules released are mainly to provide licence for direct asset service providers (DASP’s). Once licenced, DASP’d are required to go through audits to ensure that their system is secured.
11-04-2019:- The French National Assembly adopted a plan called, Plan d’Action pour la Croissance et la Transformation des Entreprises(PACTE- Action Plan for Business Growth and Transformation). This plan would establish a framework for cryptocurrency-based fundraising and for digital assets service providers.
According to this plan, a blockchain company is required to obtain a ‘visa’ or license with the country’s financial authorities. If the companies opt for not adopting the plan, then they are not entitled to solicitation, funding or any sponsorship activities.
14-11-2018:- The French government set taxes on the gains from cryptocurrency of 30%. The corporate holding will only be taxed when the cryptocurrencies converted to euros.
This announcement was done by french finance minister Burno Le Maire in a speech to the French Financial market regulator’s annual conference.
09-10-2018:- The bill was approved at its first reading in the National Assembly.
24-09-2018:- The French National Commission on Informatics and Liberty released guidance for applying general Data Protection Regulation (GDPR) to blockchain technologies.
18-06-2018:- PACTE bill was presented to the council of ministers.
04-05-2018:- The Minister of Economy and Finance, Burno Le Maire presents a series of measures to be included in PACTE.
26-04-2018:- The French Council of State has announced that it has changed the tax rates for the cryptocurrency sales from 45% to 19%. The reason was cryptocurrency was reclassified as movable property. The exceptions to this are the coins earned directly from mining operations, which will be taxed as income.
19-03-2018:- The French Finance minister Bruno Le Maire, reported that France plans to create a legal framework for ICO’s. The action plan would be proposed to the French Government in the month of April/May.
This proposal would give French Market Regulator authorities (AMF) the ability to grant authorization to companies to issue coins or tokens in ICO or token sales. It is mandatory that the companies meet the criteria set in virtue of investor protection.
05-02-2018:- Online public consultation ended with 63000 votes.
16-01-2018:- The French Finance Minister announced the creation of a working group to develop cryptocurrency regulations. The former deputy governor of France’s Central Bank, Jean-Pierre Landau, will head the group.
The goals of the working group were to establish more control over the development of new financial products related to cryptocurrencies. To prevent the use of cryptocurrencies in tax evasion, money laundering, funding of terrorism or other criminal activity was part of the work.
15-01-2018:- Launch of online public consultation.
08-12-2017:- France passes new rules for trading unlisted securities instantly. The new rules mean that banks and fintech companies can set up blockchain platforms for trading of unlisted securities avoiding the middleman like brokers and custodian banks.
23-10-2017:- Launch of first PACTE consultation phase.
23-07-2014:- The French Senate released a report focusing on the type of regulation the government has to apply on Bitcoin transactions. It called Bitcoin as a type of virtual bartering tool and called cryptocurrencies a ‘long term trend raising important legal and economic matters, that can no longer be disregarded by public authorities’.
11-07-2014:- In a report, the Finance Ministry has announced its plans to introduce customer identity verification for Bitcoin distributors and other platforms by the end of the year.
07-07-2014:- The France Police shut down a Bitcoin exchange operating illegally in France. It seized 388 Bitcoins. The site operators were examined on charges of illegal banking, money laundering and illegal gambling websites.
23-06-2014:- The Senate committee of France heard an affidavit on the issues pertaining to the development of Bitcoin and similar other virtual currencies. The committee came up with the conclusion that cryptocurrencies are a long term trend and public authorities cannot ignore them.
The committee also accepted the risks involved in Bitcoin but at the same time said it would offer multiple opportunities in future. And hence public authorities need to work on the regulatory framework.
25-04-2014:- The French Ministry of Economy and Finance said that revenues generated from digital currency are taxable. No matter that cryptocurrency is still not recognised by the state. It also said that it required a declaration from the bank with the French Anti-Money laundering agency, if the sale of virtual currency is routed through a bank.
05-12-2013:- The French Central Bank issues a warning about risks associated with virtual currencies. The risks included
- Security risks
- Absence of central regulatory authority
- Speculation and huge volatility
- Legal risk
- Use of currencies for illegal activities.
Cryptocurrencies enjoy the most legal status in France accepting them as currencies. The regulations on the cryptocurrencies and the exchanges are also encouraging. The government is also very progressive in implementation of new innovations using blockchain technology.
I hope a good future is welcomed by France for the cryptocurrencies and its business. The upcoming regulations would surely glorify the cryptos in France and also the economy would also be boosted with technology integration.