As part of our ongoing expert series on global crypto legal regimes, we analyze and evaluate different regulatory approaches for digital assets. This article sheds light on France, and how the financial regulator, AMF, is handling the transition from the country’s previous licensing regime to the new MiCA rules.
As the implementation date for MiCA approaches at the end of 2024, each EU member state is required to set up a process for crypto-asset service providers (CASPs) to undergo the appropriate notification or licensing requirements within the defined transition period.
2024 context: The existing French licensing regime
France has had a licensing regime in place for crypto-asset service providers (CASPs, known as prestataires de services sur actifs numeriques or PSANs in French) since 2019. Therefore, MiCA will supersede the established system.
In 2023, following the collapse of FTX, the French government updated its existing CASP licensing regime to enforce new rules regarding security and internal control systems, including procedures for managing conflicts of interest. As such, French CASPs may be licensed under the initial (simple) regime or later (enhanced) regime. Both types of licenses will qualify French CASPs to benefit from transitional arrangements as the new MiCA rules come into force.
As of September 2024, there are over 100 registered CASPs in France, with the majority being crypto-native firms, including established names such as Binance, OKX, and Bitstamp. Notable institutions that are registered include the crypto arm of Societé Generale, and Delubac & Cie. The latter was the first French bank to begin offering digital asset services to clients.
Overview of MiCA procedure and timeline
Broadly, MiCA introduces the EU-wide requirement for CASPs to hold a license from the financial regulator of the member state in which they are based.
However, MiCA makes specific provisions for “certain financial entities” (Article 60) that are already approved under EU rules to operate as regulated credit institutions, securities depositories, investment firms, and others. These provisions exempt these firms from the requirement to obtain a CASP license.
Pursuant to Article 60, these entities are only required to notify the competent authority at least 40 days before providing that service for the first time.
Notification procedure
The French financial regulator, the Autorité des Marchés Financiers (AMF), has not issued any formalities regarding the notification procedure. Therefore, unless this changes, it can be assumed that qualifying entities can simply issue a written notification to AMF of the services they intend to provide within 40 days of the start date of the service provision. Since MiCA only takes effect from 30th December 2024, a qualifying entity must notify AMF by the latest 20th November 2024 to begin providing services under the new rules on 31st December 2024.
Licensing for new CASPs
Entities that don’t qualify for the Article 60 exemption must obtain a CASP license to begin providing services under MiCA once it comes into effect after the end of December.
Since 1st July 2024, the AMF has been accepting preliminary CASP applications, which it states will be pre-examined with a view to issuing a license that will be effective once MiCA comes into force. The AMF has published detailed guidance (in French) on its website for CASPs interested in initiating the procedure.
Any CASP without a PSAN license under the existing French regime will need to apply to AMF for a CASP license using the preliminary application procedure as soon as possible to begin providing services in France once MiCA is implemented.
Transitional arrangements for PSAN license holders
CASPs already holding a PSAN license, either under the initial simple regime or the 2023 enhanced regime, will benefit from a transition period. They will have until 30th June 2026 to apply for a CASP license, and until then can continue providing services to French users under their existing license.
Even so, an important point to note here is that the French license doesn’t convey the full EU rights of the MiCA CASP license. Therefore, French CASPs benefiting from transitional arrangements will not be able to “passport” their PSAN license into other member states until they obtain a CASP license from the AMF.
As such, French-registered PSANs are still advised to start the preliminary application process as soon as possible should they wish to benefit from the freedom to operate as a CASP across all 27 EU member states under MiCA.
Market opportunity for French CASPs
According to the Chainalysis 2024 Crypto Adoption Index, France ranks 22nd worldwide for crypto adoption and third in Europe, behind only the United Kingdom and Germany.
Furthermore, a survey of French people conducted by bank Delubac & Cie found that 20% of respondents favored banks as an intermediary for crypto custody, and 23% would be willing to switch banks to access digital asset services. Among EU member states, this makes France a prime retail market for CASPs.
Thanks in part to the regulatory certainty provided by the AMF and now MiCA, institutional participation in digital assets is increasing rapidly. According to a report compiled by KPMG and French digital asset association Adan, as much as 80% or more of trading activity could be attributed to institutions.
A growing market and regulatory certainty provide the opportunity, while the increasing maturity of institutional digital asset infrastructure provides the means for banks and traditional financial institutions to make a smooth market entry as a CASP.
Launching a MiCA-compliant CASP offering with Wyden
Wyden Infinity covers the entire end-to-end trade lifecycle of digital assets across all pre-trade, trade and post-trade use cases. It enables sell-side firms to build and maintain retail and institutional client offerings as well as internal prop-trading needs via a single platform, making Wyden Infinity the ideal choice for banks and brokers when building and scaling their fully MiCA-compliant digital asset businesses.
A key advantage of the Wyden platform is that it offers true best execution through market-wide connectivity to over 55 trading venues and a smart order routing system that carries out price comparisons and order splitting to achieve the optimal execution terms. Transparency is built into the system via real-time pre- and post-trade data, and Wyden’s standalone accounting system offers a fully auditable transaction trail.
Integration with custody partners, such as Copper, Metaco (now Ripple), and Fireblocks, also means Wyden maintains an auditable record of transaction flows between custody and trading with automated liquidity management solutions that ensure an uninterrupted trading experience. Core banking integrations ensure smooth reconciliation and support the assimilation of a new digital asset offering into established workflows.
Contact us today for an initial discussion about implementing a MiCA-compliant digital asset offering in your organization.
Please note that the above article does not constitute legal advice.