With new discussions on crypto regulation opening next week, MEP Aurore Lalucq gives an interview to BFM Crypto.
BFM Crypto: As a member of the European Parliament’s Economic and Monetary Affairs Committee, what do you think of the French crypto framework?
Aurora Lallock: Oversight of crypto assets – I insist on the word assets, because they are financial products, not currencies – on a global scale is virtually non-existent. France is one of the first countries to work in this field, notably by creating PSAN (Digital Asset Service Providers). However, this is completely insufficient: cryptocurrency operators do not currently have to fulfill the same obligations as so-called traditional finance.
Can you give us an example?
There is, for example, ambiguity about the popular PSAN framework, which may be subject to registration and/or approval. The problem is that only accreditation is really binding and imposes real standards in terms of transparency and good governance. But it remains optional. A double standard that makes the current certification procedure for crypto platforms unreadable and therefore ineffective. If registration is easy to obtain, consent is more restrictive. Players also largely play on this ambiguity by making it clear that they are registered with the AMF even though this has almost no consequences for them and their practice.
We have passed legislation at European level to bring legislation closer to accreditation. The idea was to have a single regulatory framework for all and have a system close to approval under MICA regulations (draft European regulation “Markets in Crypto Assets” is currently under discussion, editor’s note). We want to propose strong regulation in a sector that has virtually no commitments yet. For example, when someone goes to his bank, the latter must respect certain criteria, which is not always present on the side of crypto-asset trading platforms.
What are the other components of mica regulation?
MICA aims to better identify and therefore better regulate crypto assets on a European scale, because today there is little regulation and almost no oversight. We want to standardize these rules at the European level in order to better protect consumers and users. Among these developments are the classification and supervision of assets, the obligation of service providers to obtain approval, and the subjecting of their senior managers to competency and reputation tests, and the issue of private funds is also addressed.
In the same way, it is about applying to crypto assets with the same standards that are required in the world of banking and finance. For example, there is no obligation in the cryptocurrency sector regarding market manipulation, as there is in finance. MICA provides rules to avoid a number of market manipulations and fraud. Another example, in traditional finance, the banker must offer a financial product at the best price: this is not the case in the cryptocurrency sector and Mika seeks to lay the foundations for better user protection.
Doesn’t the regulation contradict the philosophy of the sector, which wants to be decentralized? Why do we apply the same rules as in the traditional sector?
Because the financial sector, whether it is decentralized or not, remains a financial sector and must simply comply with a certain number of rules. The challenge is to bring crypto assets into the normal rules, which apply to the rules of banking and finance. In addition, the “anti-system” character in cryptography is often used as an excuse to hide very real interests. Moreover, when we are in a market that is valued at around 3000 billion and there are more and more bridges with traditional finance, it is not up to the players in the market to define their own rules.
We believe that there are risks related to financial instability because so far the crypto-asset sector has been able to develop without any rules to follow. So yes, with the spread of regulations, and the disappearance of products that pose a risk to the consumer in terms of risk, players risk disappearing, as is always the case when a sector is regulated, as was the case in traditional finance.
Another sensitive topic of Mica has to do with discussions around Bitcoin mining, with the “Proof of Work” or Proof of Work method of transaction validation found in the viewfinder. What position did you defend?
I’m against Proof of Work for environmental reasons. In addition, many of us prefer the Proof of Stake method because we consider the Proof of Work method to be very polluting. With Mica, there has been some kind of turmoil from the industry that was concerned about one of its main PoW-based products, Bitcoin. Today, however, Mika states, Proof of Work technology is highly contaminated. Then, it will be urgent to evaluate the environmental impacts of this mining method and draw conclusions.
Mica will enter a tripartite (intra-EU tripartite negotiations between Parliament, Council and Commission) around mid-May and there is a risk that the negotiations may not go in the right direction on environmental issues. On the other hand, on the part of central bankers and some regulators, the topic is taken very seriously. It will therefore be necessary to return to these basic questions, whatever the results of the empirical experiment.
What measures have you included in the TFR directive (for the “Money Transfer Regulations” aimed at applying measures against money laundering), as the shadow rapporteur on this subject?
The Anti-Money Laundering Package, which includes the Transfer Directive, has been reopened to include the issue of crypto assets. In this context, I advocated the implementation of user identification (know your customer or ‘know your consumer’) starting from € zero. Why this threshold? Because the peculiarity of technical cryptography makes its use fast in the context of a whale, and this means the fact that small amounts are hashed and sent to the recipient quickly and instantly, which is not possible for the bank. It’s not about pointing fingers at crypto assets, it’s about protecting people. My other request was that crypto platforms also require identification when transacting with non-hosted wallets, which we know nothing about today, a kind of black hole in the crypto environment.
How will these topics be received during a trilogy on total opponents on April 28?
Some criticized the measures. I hope everyone takes responsibility and that there is no KYC limit in the beta version. On the other hand, due to the pressures of the cryptocurrency industry, I doubt that we will succeed in winning the case in the case of non-hosted wallets.
What do you think of the message from the crypto industry warning of plans to regulate the sector? The sector is particularly referring to the issue of the threshold above which transfers of crypto assets must be accompanied by information on the sources and beneficiaries of the transfer.
In the FATF (the Financial Action Task Force, an intergovernmental body of about forty member states that sets international standards on money laundering and terrorist financing, editor’s note), the European directive initially proposed a threshold of 1,000 euros like banks. . However, it was the Council that proposed the zero threshold, a proposal I defended and adopted and voted on in the ECON (Committee on Economic and Monetary Affairs, editor’s note) of the European Parliament. So there seems to be a majority on this point. Moreover, European regulations are not intended to kill decentralized finance but simply to bring it back to the rule of law. Who can be serious against that?
How do you see other organizational projects?
In the United States, there are tendencies for regulations. Could be stronger than in Europe. The International Monetary Fund continues to warn about the link between traditional finance and crypto assets. In the United States, the regulator and supervisor can be very harsh. In Europe, we are progressing much faster than in the US, which is fine. This European regulation is a very good start, and should be evaluated for the shortcomings of the second step. Moreover, I believe that there is a guiding principle in the financial field: “same services, same risks, same rules”. I think we need to reopen other European directives to include the issue of crypto assets.
What are the following open files?
We will soon be working to link new technologies with taxation, particularly with regard to how crypto assets and blockchain pose new challenges in the tax field, how blockchain can be useful in combating tax evasion and fraud, but also how cryptocurrency can be used for fraud and evasion. tax.