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France is all set to experiment a legal regulatory framework for cryptocurrency platforms later this month. The framework aims to regulate consumer protection protocols, tax mandates and capital requirements.
This move was made by the country’s top financial body, the Financial Markets Authority (FMA). Crypto firms are expected to voluntarily abide by the set of new regulations for which they would be reciprocated with regulatory approvals from the organization.
The FMA also released a statement earlier in April declaring that banks would open accounts for all such crypto firms that volunteer to be regulated. In addition, these regulated crypto exchanges and firms would also be given the option to attain an operating visa. This should give a big incentive for cryptocurrency companies to cooperate with the legal authorities in the country.
This is notably the first time for a prominent economy to take a step to regulate cryptocurrency platforms in favor of legal certifications and approvals. Although a couple of small countries did introduce regulatory laws specifically for digital currencies in the past, major economies of the world had not done so until now.
According to the executive director for legal affairs at the FMA, Anne Marechal, “France is a precursor. We will have a legal, tax and regulatory framework”. Marechal also stated that they are already in talks with three or four candidates for initial coin offerings, several cryptocurrency exchange platforms, fund managers and custodians.
With its experimental framework for cryptocurrencies, France aims to check how central banks can play their part in ensuring regulations for digital currencies. A preliminary report on this matter is expected from the European Central Bank at the upcoming meeting of G7 finance ministers.
Regulations to Help Crypto Companies?
The purpose behind this regulatory attempt is to help small to medium-size businesses grow. Many believe that clearer laws regarding the sale and trade of digital currencies would not hamper the industry’s growth at all, but would actually help it grow. Some of the crypto-related firms and associated companies have themselves asked for the sector to be regulated. The purpose behind this is to gain legal clarity, and also to introduce an aspect of respectability that comes with such rules into the largely unregulated crypto space.
According to the co-founder of the US-based cryptocurrency platform LGO, Frederic Montagnon:
“When you are an entrepreneur, the worst that can happen to you is to set up your business where there is no regulation, to see an adverse regulatory framework later imposed that jeopardizes your whole business.”
Cryptocurrencies have always remained under scrutiny of governmental financial regulatory bodies, although not with much success. This global scrutiny grew last month when Facebook revealed its plans for launching its own digital currency, the Libra digital coin. The decision of such a prominent social media giant to take part in this unregulated system raised many questions regarding consumer protection and likely systematic risks.
France’s finance minister Bruno Le Maire revealed that the country, in cooperation with the G7 central bank governors, intends to demand guarantees from Facebook regarding its digital coin launch. France also pushed to establish a special G7 task force that would supervise the crypto market, and particularly Facebook Libra.
Specifics will be released once the FMA publishes regulatory guidance.
France first proposed crypto-related rules last year, resulting in a boom of ICOs launching hundreds of new cryptocurrencies every month. However, ICOs have since gone somewhat out of fashion as newer forms of fundraising – like initial exchange offerings – come forward.