Faced with the rapid rise of cryptocurrencies and major players in the crypto-industry, the governor of the Banque de France, François Villeroy de Galhau, insists on the importance of international regulation of these conglomerates. According to him, it is necessary to rethink the current EU legislation on cryptocurrencies, namely MiCA (Markets in Crypto-assets), in order to ensure an effective framework adapted to the challenges posed by technological advances.
The limits of the current MiCA
Despite the progress made with the adoption of MiCA standards in the European Union, this regulation does not seem to be sufficient to cover all the issues related to the crypto-industry. The Governor of the Banque de France is therefore advocating for a second version of the MiCA, which would be extended to companies active in several segments of the crypto value chain.
Bank of France governor’s proposals for a MiCA 2
Promoting international cooperation
Establish a dialogue between national and international regulators to identify best practices in crypto conglomerate regulation.
Strengthen coordination among regulators to prevent the emergence of grey areas or unregulated cross-border cryptocurrency transactions.
Encourage the exchange of information and skills between financial institutions, regulators and players in the crypto industry, in order to better understand the challenges posed by this technology and to develop appropriate solutions.
Improving transparency and investor protection
Establish stricter standards for the disclosure of cryptocurrency-related information, including risks, costs and performance. This would improve market transparency and protect investors.
Establish a specific regulatory framework for companies offering cryptocurrency-related services (exchange platforms, e-wallet providers, etc.), with capital, governance and organisational requirements.
Increased monitoring of transactions on cryptocurrency exchange platforms to detect and prevent fraudulent or illicit activity.
Adapting regulation to technological challenges
Take into account the specificities of the different technologies used in the crypto sector (blockchain, smart contracts, etc.), in order to develop a regulation adapted to these innovations.
Encourage responsible innovation by supporting players in the crypto sector in developing solutions that respect regulations and protect investors.
To promote research and development in the field of cryptocurrencies and related technologies, in order to support the competitiveness of the European financial sector in the face of international competition.
The challenges for the future of decentralized finance
While some jurisdictions, such as the United States, have adopted a more hostile approach to the regulation of cryptocurrencies, the Governor of the Bank of France calls for a thorough reflection on the issues related to decentralized finance. The Autorité des Marchés financiers has also published a discussion paper exploring different regulatory avenues for this emerging sector.
The success of this approach will necessarily depend on increased international cooperation in order to establish harmonized and effective regulation at the global level. With the development of a MiCA 2, the Governor of the Bank of France wants to lay the foundation for a framework adapted to the challenges posed by crypto conglomerates and promote a responsible development of this industry.
