Cryptocurrency Regulation in France Prior to 2024

Government Support and PACTE Act

France’s approach to cryptocurrency regulation prior to 2024 was significantly influenced by its support for blockchain technologies. The country emerged as a central European hub for crypto and blockchain companies, fostering an environment conducive to the growth of various digital asset-related businesses, including exchange platforms, digital asset brokers, and hardware wallet manufacturers. This dynamism was largely due to the adoption of the PACTE Act (Action Plan for the Growth and Transformation of Companies) in 2019, which introduced the first comprehensive regulatory framework in France for initial coin offerings (ICOs) and digital asset service providers (DASPs). This framework positioned France as a leading jurisdiction for blockchain technology​​.

Digital Asset Service Providers (DASPs) Regulation

Under the PACTE Act, a DASP is required to register with the Financial Markets Authority (Autorité des Marchés Financiers, AMF) when providing services like custody of digital assets, buying or selling digital assets in legal tender, and operating a digital asset trading platform. The illegal practice of these activities without registration is punishable by imprisonment and fines. Furthermore, the supervisory and enforcement powers of the AMF were strengthened, and a new registration statute was introduced, which became mandatory as of January 1, 2024​​.

Licensing and MiCA Regulations

Optionally, DASPs could obtain a license, with the requirements being substantially similar to the MiCA (Markets in Crypto-Assets) regulation. The MiCA, adopted by the European Parliament in April 2023, provided a harmonized European framework for the regulation of crypto-assets and stablecoins. Under MiCA, all crypto-asset service providers (CASPs) active in the EU market are obliged to apply for a CASP license and comply with requirements like AML/CFT compliance and establishing a resilient IT infrastructure​​.

ICOs and Taxation

The public offering of tokens, or ICOs, is defined as a fundraising operation using distributed ledger technology (DLT), allowing issuers to apply for an optional visa from the AMF. This visa indicates regulatory validation of the ICO’s information document. France’s tax regime applicable to capital gains on the sale of digital assets is based on the distinction between individual and professional sellers. Individual investors are taxed at a flat rate of 30%, while professional investors are subject to a progressive tax scale​​.

AML/CFT Compliance

Entities offering services on digital assets, like DASPs and ICOs, must comply with AML/CFT regulations. The AMF and the Prudential Supervision Authority (ACPR) are responsible for assessing the effectiveness of AML/CFT procedures implemented by companies subject to this regulation. In September 2022, the AMF sanctioned a DASP for the first time by withdrawing its registration due to non-compliance with AML/CFT requirements​​.

Regulatory Sandbox and Pilot Regime

As of 2023, France did not have a regulatory sandbox dedicated to blockchain or fintech initiatives. However, the European Commission launched a blockchain regulatory sandbox in February 2023. Additionally, the Pilot Regime enabled licensed investment service providers to use DLT for issuing, registering, transferring, or storing financial instruments, ensuring investor protection and market integrity​​.

In summary, prior to 2024, France had established a comprehensive and progressive regulatory environment for cryptocurrencies, driven by the PACTE Act and subsequent regulations. This framework included mandatory registration and optional licensing for DASPs, adherence to AML/CFT regulations, and alignment with the emerging MiCA standards, positioning France as a frontrunner in the regulation of digital assets in Europe.