MEP Aurore Lalucq gave an interview to BFM Crypto, as new discussions on the regulation of cryptocurrencies will begin next week.
BFM Crypto: As a member of the European Parliament’s Committee on Economic and Monetary Affairs, what do you think of the French-level cryptocurrencies framework?
Aurora Lalucq: Control of crypto-assets – I insist on the word assets, because they are financial products, not currencies – is virtually non-existent at a global level. France is one of the first countries to work in this field, especially by establishing the PSAN regime (Digital Asset Service Providers). However, this is rather inadequate: crypto players do not currently have to fulfill obligations in what is called traditional finance.
Can you give us an example?
For example, there is uncertainty around the framework of famous PSANs that may be subject to registration and/or approval. The problem is that only accreditation is truly binding and sets real standards in terms of transparency and good governance. But it remains optional. A double standard that renders the current certificate procedure unreadable and therefore ineffective for crypto platforms. If registration is easy, obtaining consent is more restrictive. Players also play heavily on this ambiguity by announcing that they are registered with the AMF, although it has virtually no consequences for them and their apps.
We passed laws at European level to bring legislation closer to accreditation. The idea was to have a regulatory framework that is the same for everyone, and to have a system that is close to being approved under Mica regulations (the European regulation “Markets in Crypto-Assets” draft currently being discussed, editor’s note). We want to propose a robust regulation in an industry that has had almost no obligations to date. For example, when someone goes to the banker, the banker has to meet certain criteria, this is not always on the side of crypto asset trading platforms.
What are the other components of the mica arrangement?
Mica aims to better define 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 European level to better protect consumers and users. Among these developments are the issue of equity, such as the classification and auditing of assets, the requirement for service providers to obtain approval, and the requirement to subject their senior managers to competence and reputation tests.
Likewise, it is a matter of applying to cryptoassets the same standards required in the world of banking and finance. For example, in the crypto sector, there is no obligation in market manipulations as in finance. Mika provides rules to prevent a range of market manipulations and fraud. Another example, in traditional finance, a banker must deliver a financial product at the best price: that’s not the case in the cryptocurrency industry, and Mica is trying to lay the foundations for better user protection.
Isn’t regulation against the philosophy of the industry that wants to be decentralized? Why should you apply the same rules as in the traditional industry?
Because a decentralized or decentralized financial sector remains a financial sector and quite simply has to follow a certain number of rules. The challenge is to bring crypto assets to the normal rules that apply to banking and finance rules. In addition, the “anti-system” character of the crypto sphere is often used as an excuse to hide very real interests. Moreover, when we’re in a market of around 3,000 billion and more bridges with traditional finance, it’s not for market players to set their own rules.
We believe there are risks of financial instability because so far the crypto-asset sector has been able to thrive without any rules to follow. So yes, with the spread of legal regulations, the risk of disappearance of products that are dangerous for the consumer, the risk of disappearance of the players, as always when a sector is regulated and as in the traditional finance.
Another sensitive topic for Mica was the controversy surrounding bitcoin mining with the “proof of proof” of transactions, or the method of verifying the PoW in the viewfinder. What position did you defend?
I am against PoW for environmental reasons. Also, most of us prefer the “proof of proof” method because we find the “proof of work” method too polluting. With Mika, there was some sort of turmoil in the industry worried about bitcoin, one of the flagship products tied to PoW. But Mica reminds today that PoW technology is very polluting. Next, it will be urgent to evaluate the environmental consequences of this mining method and draw conclusions.
Mica will enter the triad (tripartite negotiations within the European Union between the Parliament, the Council and the Commission) in mid-May and there is a risk that the negotiations on environmental issues will not go in the right direction. On the other hand, the issue is taken very seriously by central bankers and some regulators. It will therefore be necessary to return to these fundamental questions, regardless of the results of the experiment.
What kind of measures did you take as shadow reporter in this regard in the TFR directive (for the “Fund Transfer Regulation”, which aims to implement an anti-money laundering measure)?
The anti-money laundering package containing the remittance directive has been reopened to include the topic of crypto assets. In this context, I advocated the practice of user identification (KYC or “know your consumer”) from zero Euros. Why such a threshold? The specificity of technocrypto makes it quick to use in a smurfing context, namely the fact that small sums can be shredded and sent to a recipient quickly and instantly, which is not possible for a bank. It’s not about pointing fingers at crypto assets, it’s about protecting people. My other request was for crypto platforms to ask for identity when they transact with non-hosted wallets, which are a kind of black holes in the crypto environment, about which we know nothing today.
How will these issues be covered during the trilogy at TFR on April 28?
These measures are criticized by some. I am hopeful that everyone will be held accountable and that the absence of the KYC threshold will be kept in the essay. On the other hand, due to pressure from the crypto industry, I doubt we’ll manage to win the case on non-hosted wallets.
What do you think of the letter from the cryptocurrency industry warning of plans to regulate the industry? The industry is specifically addressing the question of the threshold at which crypto-asset transfers should be made along with information about the sources and beneficiaries of the transfer.
On the issue of FATF (a financial action task force, an intergovernmental body that brings together forty member countries and establishes international standards on money laundering and terrorist financing, editor’s note), the European directive initially proposed a threshold of 1000 Euros, similar to those of banks. But it was the Council that I advocated and proposed the zero threshold, which was accepted and voted on at the ECON committee (Committee on Economic and Monetary Affairs, editor’s note) in the European Parliament. So at this point there seems to be a majority. Moreover, European regulations are not intended to kill decentralized finance, but merely to return it to the rule of law. Who can seriously oppose this?
How do you evaluate other regulatory projects?
In the United States, there are trends towards regulation. They may be stronger than Europe. The IMF continues to warn about the link between traditional finance and crypto assets. In the United States, the regulator and auditor can be very harsh. We’re moving much faster in Europe than in the United States, and that’s good. This European arrangement is a very good start, it should be evaluated in a second step to see what the shortcomings are. I also think there is a directive in finance: “same services, same risks, same rules”. I think we need to reopen other European directives to include the topic of crypto assets.
What are your next open files?
We will soon be working on the connection between new technologies and taxation, specifically how crypto assets and blockchain pose new challenges in the tax field, how blockchain can be useful in combating tax evasion and fraud, as well as how cryptos can be used. area of fraud and tax evasion.