A glimpse at AML & Cryptoassets in France To everyone’s knowledge, the French nation is passionate about good cheese, excellent wine, well-being, and quality of life in general. The country is known for its traditional systems, arduous changes in structures and heavy bureaucracy. In contrast, Cryptoassets have come along with a new attitude to money and thus the financial environment is rapidly changing. This article aims to provide insights into how the French market approaches this challenge and what the French think about the challenges that Cryptoassets bring about. A. A Country Perception of Crypto Money Cryptoassets are perceived as a profitable investment thanks to results achieved by Bitcoin and Ethereum, the media’s attention and the trending popularity on social media.

As a result, Cryptoassests have become very attractive for the investors who tend to play down the risk of the cryptoassets. The fact remains that these assets are highly risky and speculative, which can be demonstrated by the volatility of Bitcoin between January and May 2021, where the price hit a high of c.US$60k and a low of c.US$30k. Another common view exists regarding the danger of Cryptoassets if used as payment for traffickers at one hand but acknowledges the technological revolution happening in the financial system. As for the former, during the years 2019 and 2020 a network financing terrorism in Syria operated in France. Funds were raised by the group via the purchase of Crypto-Currency coupons whose references were given to contacts in Syria and then credited to bitcoin accounts. Investment moods into Cryptos within France can be best evidenced by a survey conducted in February 2021 by market research group Ifop. According to its results, 14% of the French respondents were ready to invest into Bitcoin or other Cryptoassets and 3% had already done so.

Furthermore, the survey shows that Cryptoassets are primarily seen as speculation tool, rather than as a real exchange asset. Not surprisingly, it also highlighted that Cryptos are most attractive to the younger generation aged 18-25 years. B. Government Support & Regulatory Framework Back in 2019, the French Minister of Finance expressed a great interest in the Crypto domain and ambitions for France to become the “Crypto-nation”. The government’s support for the sector was demonstrated when it adopted flexible regulations. Then, towards the end of 2019, the French regulator, the Autorité des marchés financiers (AMF), started issuing licenses (also called “visas”) to Crypto service providers. Depending on services provided, the registration was mandatory for some players on the market and optional for others. At that point of time, the registration was obligatory only for two activities – digital asset custody and buying/selling digital assets against a legal tender (i.e., fiat currency).

There was a belief that this visa, a label granted to those Crypto firms complying with AMF requirements, including Anti-Money Laundering regulations, should help to strengthen the credibility of these companies. However, in October 2020, not long after France faced yet another terrorist act, the Minister of Finance revealed plans to strengthen the Cryptoasset oversight. Stating that Cryptos “have no physical existence” and “pose a real problem of financing terrorism”. The end of 2020 represented a significant moment for Crypto firms as it marked end of the transitional period for conducting business on digital assets without registration. Most recently, in April 2021 the government released a Decree No. 2021-387 of April 2, 2021 "relating to the fight against the anonymity of virtual assets and strengthening the national system for the fight against money laundering and the financing of terrorism”. The Decree complemented the already existing French legal framework (PACTE Law, 2019) for Initial Coin Offering (ICO) and for the activities of digital asset service providers (abbreviated PSAN in France). It prohibited the anonymity of Crypto-asset transactions which means that the PSAN and ICO issuers must identify their customers prior to each transaction and to reveal its nature. Importantly, the decree specifies that when electronic money is used for the purchase of digital assets, issuers of electronic money are subject to due diligence obligations with regards to their customers. C.

Registration with the AMF As a result, the registration with the AMF is currently mandatory for these 4 types of services: Digital asset custody; Buying or selling digital assets in a currency that is a legal tender; Trading digital assets for other digital assets; and Operating a trading platform for digital assets. The first Crypto platform to obtain the AMF registration was Coinhouse in March 2020 and to date a total of 17 firms have managed to pass the registration process. There is a growing interest in registration whereas 7 were granted in 2020 and 10 more in 2021 while the year is not even halfway through. Services registered: Digital asset custody (11x); Purchase/sale or digital asset for legal tender (15x); and Trading of digital assets for other digital assets (6x). To conclude, France enjoys a fairly high level of interest into Cryptoassets by investors, firms and government. There is an interannual increase in the number of companies dedicated to this domain and in registering with local regulators. The country declared a clear interest in deterring money laundering and terrorist financing related to Cryptoassets. Gradually, it created a complex legal framework and extended registration requirements on more activities. While developing new Crypto business, firms need to dedicate a fair amount of time to their awareness of valid EU and French regulations, to registration activities and to its AML program. Lysis accompanied cryptoassets firms from the governance, risk, and compliance perspective for over 4 years and here is where we can help: Registration Support Service; AML Crypto Related Training; and MLRO/DMLRO Service. Lysis is physically present in Paris, France with its office located next to Place Vendôme. Get in touch for more details.