The MEP returns to the urgency of regulating this sector in Europe and goes further than the current draft regulations.
The bankruptcy of the giant FTX is causing an unprecedented upheaval in the cryptocurrency ecosystem. As US President Joe Biden calls for global regulation of cryptocurrencies following the collapse of FTX, BFM Crypto takes stock with MEP Aurore Lalucq on regulation in Europe.
BFM Crypto: The Market in Crypto Assets (MiCa) regulation, which allows Europe to regulate cryptocurrencies, will come into effect in 2024. Are you satisfied with the final version? Should we go further in your opinion?
Aurora Lalucq: This is a first step, but we need to go further, in particular to create a regulatory framework for NFTs. More generally, cryptos are financial assets and should be treated as such. I have always argued for integrating them into existing legislative frameworks. The current situation strengthens me in this conviction. Indeed, I have constantly warned about the dangers of this unregulated financing. And unfortunately, it’s clear that my fears turned out to be correct.
Can the rules be changed further when they come into effect to keep them in line with reality, especially with the collapse of FTX?
The reality in the sector is FTX’s bankruptcy. It is Voyager or Celsius and the thousands of customers who are being prevented from getting their money back. It is the dissolution of Terra/Luna, yet presented as one of the strongest stables on the market. Each time these are frozen accounts, bank runs, Ponzi schemes, lack of equity, market manipulation, failure to comply with the order of best execution… not to mention the most basic scams. There is therefore an urgent need to regulate and really regulate, because PSAN in its registration version is above all a matter of “regulatory washing”. It is urgent to use MiCA as soon as possible.
What will this regulation really change for investors?
Until now, the crypto market has not met any of the most basic regulations of the banking and financial sector. This is an important first step in the implementation of a framework for cryptoassets in Europe. It first involves defining what are cryptoasset providers and cryptoasset providers in order to create a single framework for these providers. There are a number of obligations regarding best execution orderconsumer protection, combating market manipulation and money laundering.
The European Parliament is expected to produce a report on NFTs this year, which will be sent to the European Commission. Do you want to be involved in the development of this report?
I can’t tell you yet if I will be in charge of this topic or if it will be one of my colleagues. Crypto trolls and self-proclaimed experts seem to have made me their primary target. However, the issue of the regulation of cryptos represents only a part of the files that I manage on a daily basis. I also work with insurance regulations, banking supervision, accounting standards and taxation, to name just a few work topics.
Aren’t the US smarter than Europe as they wait to see how MiCa will shape up so they can refine their own rules?
Smart? It seems to me that the role of the legislator is not to play “the smartest”. Its aim must be to protect the public interest – and not to defend a few private interests – to protect consumers and financial stability or to fight the many excesses of the sector.
Do you understand that the crypto ecosystem in France and Europe fear the US more than Europe so far?
Above all, I understand that consumers should fear this market as it is, because it is not regulated, and only invest in what they are truly ready to lose.
Web 3 is already changing our relationship with financial products (decentralized financing, which also allows the granting of loans or credits), to payments (cryptocurrencies that promote financial inclusion in certain countries, etc.) to real estate (tokens). .. How not to see the revolution in progress?
The ongoing revolution? Financial inclusion? Like the one that took place in El Salvador, where almost 80% of the population believes that the state should not invest a penny more in bitcoin? Not to mention that with the collapse of Bitcoin, El Salvador now finds itself in difficulties with its creditors. Or in the Central African Republic, where only 14.3% of the population has access to electricity according to the World Bank… Two countries that really have other priorities than investing and linking their fate to a highly speculative and volatile financial asset.
Let’s be a little serious, if this sector wants to flourish, it needs to come out with elements of language, permanent self-promotion. The gap between rhetoric and reality discredits it a little more every day… Afterwards, there are useful uses of blockchain, in the form of auditing and systematizing tax practices, for example. But this technology is too often used to justify non-compliance with the most basic rules. Under the guise of not constraining a nascent sector, we have for too long accepted that it will do almost anything.
More and more American banks are offering cryptocurrency services, why do you think French banks are not yet following this path?
I think we have to be careful with the figures presented. Furthermore, I do not view the links between regulated and unregulated finance very favorably. If the many crypto crashes that have taken place this year have not had dramatic consequences for the rest of finance, it is precisely because the bridge between crypto assets and traditional assets remains quite limited. And that’s good. Otherwise, the pollution effect would have been much greater, and financial stability at stake Globalized finance is already part of an uncertain balance that we somehow try to secure through regulations and rules. Let’s avoid adding a destabilizing factor by attaching it to an even more unstable sector. As long as crypto is not regulated, the links between crypto assets and so-called traditional finance should not increase.
Economy Minister Bruno Le Maire wants France to be the “base camp” for cryptos and DeFi in Europe, what do you think?
That he is definitely a great visionary. This is the same finance minister who didn’t know what a super profit was, right? Contrary to all European and international institutions and even our legislation. The government tirelessly repeats the same language: it wants to encourage innovation without forgetting regulation. The reality is that he only fills half of this timetable. Granted, the government is eyeing crypto players, the president receives the head of Binance. But at the same time, the rules implemented with the PSANs are absolutely inadequate. Worse, it gives the illusion of a regulated sector, which is always the best way to do something concrete and send consumers into the wall.
I have also written to the Minister on this issue, pointing out that only accreditation effectively imposes standards of transparency, good governance and consumer protection. However, no platform is approved. Worse, they play on this vagueness between registration and approval to mislead consumers, claiming to have the AMF mark, without any serious commitment.
In April, you said in our columns that you should work on how cryptoassets and blockchain present new challenges in the tax field. Have you made progress on this axis?
It is obvious that work needs to be done to better adapt our taxation to the arrival of these assets, which are financial assets and should therefore be treated as such. Some work has been done, particularly by the OECD, to try to better define what they call the taxable events. In short, when is value created and how should it be taxed. These are also the questions we ask ourselves in the European Parliament in an attempt to create a uniform framework at European level.
Last October, the European Parliament adopted a resolution for which I was co-rapporteur on the issue of new forms of taxation linked to blockchain and in particular the issue of taxation of crypto-assets. This is obviously a first step. Our goal is to continue working on this topic. This is why we have asked the European Commission to launch a series of assessments regarding the tax treatment of crypto-assets in the EU in order to bring forward a series of good practices and move towards uniform regulation on a European scale.
The giant Binance wants to help Elon Musk promote the adoption of cryptocurrencies on the social network. How do you see this initiative?
Binance and Elon Musk, it really makes you dream: the man who, according to the Bloomberg investigation, is suspected of promoting money laundering through his platform, and the one who sabotages his by always blurring the lines a little more between fake news and debate about ideas. This nevertheless raises a key question: in such a situation, how independent will Twitter be from Binance? My appearance is that of a person who is attached to democracy and who is concerned about such an alliance.
Perhaps it would be better for Elon Musk to stop messing around with Twitter and for Binance to start applying the most basic rules of traditional finance. It would be a really interesting and innovative initiative. But let’s wait and see how these two companies will fare in a few months.