As reported by French Central Bank, the Decentralized Finance (DeFi) protocols and projects might be required to incorporate or certify. They need to prove that they abide by the governance and national security norms. The regulator wishes the supposed crypto laws to cover multiple blockchain-based structures and entities. The ACPR wants the EU consumer protection rules to cover DeFi.
The French Crypto Regulations
Lawmakers have their focus shifted to financial services operating without any intermediary, mostly working on a software program that requires individuals to borrow and lend without any involvement from the bank. Recently DeFi was supposedly used in raising funds for North Korea illegally. This might be the reason why the U.S. Treasury Department wants to have stricter AML laws.
In a consultation paper, APCR, the arm of the French Central Bank, which oversees the insurers and banks, said that the same rule that governs the traditional finance system could not be used in disintermediated finances; some upgradation is required. Hence ACPR has asked for consultations and is open until May 19.
The paper mentions that the projects or protocols working in sensitive services like healthcare etc. would have to incorporate and shall be subjected to supervision. The paper also refers to the steps required to enhance the security of smart contracts by applying the certification mechanism. Meaning they would be issued a certificate to ensure their safety and reliability.
The proposed new rules prohibit the intermediaries from selling higher-leverage products to regular retail investors. It should be noted that DeFis often indulge in high-risk products for a select few seasoned professionals in regular finance. Even if these products promise higher gains, they might not follow consumer protection guidelines.
A group of lawyers and regulators from the Legal High Committee for the Financial Market of Paris argue about the legal status of Decentralized Autonomous Organizations (DAOs); a report is supposed to be released this fall. The supposed legalization might follow the footsteps of the Law Commission of England and Wales, as they have already said that innovative finance has the potential to rattle up the centuries-old property norms.
EU’s MiCA Crypto Law Debate to Begin April 18
The EU’s Markets in Crypto Assets Regulation (MiCA) will be discussed on April 18 in the European Parliament. There will be discussions on bringing the crypto licensing regime across the bloc. However, the outlines for the law were designed in June 2022, but it is happening now due to delays in the agreement over legal text.
The texts are to be translated into all 24 official languages of the European Union.
If everything goes as planned, the legislation’s final voting might occur on April 19. There would also be other discussions on transfer-of-funds regulations, which required crypto entities to verify their customer’s identities and were accepted provisionally in June 2022.
In October last year, the members of Parliament’s Economic and Monetary Affairs Committee voted 28-1 in favor of the MiCA legislation, while the national diplomats also validated the plan.
The proposed legislation allows crypto companies to operate across the bloc.
At the same time, in return, they need to meet the governance and consumer-protection norms and also have to follow the reserve requirement for stablecoins. If the MiCA norms are approved in the parliament, they will be published in the official journals of the European Union and could take effect one to three years later.
Source: https://www.thecoinrepublic.com/2023/04/12/french-central-bank-hints-defi-might-have-to-certify/