The MEP returns to the urgency of regulating this sector in Europe, going beyond 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 MiCa (Market in Crypto Assets) regulation, which allows Europe to regulate cryptocurrencies, will take effect in 2024. Are you satisfied with the final version? Should we go further in your opinion?
Aurora Laluq: This is a first step, but we need to go further, in particular to create a regulatory framework for NFTs. More generally, cryptocurrencies are financial assets and should be treated as such. I have always supported the need to integrate them into existing regulatory frameworks. The current situation strengthens me in this conviction. Indeed, I have constantly warned of the dangers of this unregulated finance. And unfortunately, it’s clear that my fears have been proven correct.
Could the regulation be further modified before its entry into force so that it adheres to reality, especially in the context of the collapse of FTX?
The reality of the industry is the bankruptcy of FTX. It is that of Voyager or Celsius, and of the thousands of customers who find themselves prevented from recovering their money. It is the disintegration of Earth/Moon, but presented as one of the strongest stables on the market. Every time, it’s about blocked accounts, bank runs, Ponzi pyramids, lack of fairness, market manipulation, failure to best execute order… not to mention the most basic scams. There is therefore an urgent need to regulate and really regulate, because the PSAN in its registered version is above all a question of “regulation scrubbing”. The urgency is to apply the MiCA as soon as possible.
What will this regulation really change for investors?
Until now, the cryptocurrency market has not met any of the most basic regulations of the banking and financial sector. This is an important first step in implementing a crypto-asset framework in Europe. First, it aims to define what crypto-assets and crypto-asset service providers are in order to create a single framework for these providers. There are a number of obligations in terms of best execution orderconsumer protection, fight against 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. Will you be involved in the development of this report?
I still can’t tell you if I will take care of this matter or if it will be a colleague of mine. Crypto trolls and self-proclaimed experts seem to have made me their main target. However, the issue of cryptocurrency regulation represents only a fraction of the files I deal with on a daily basis. I also deal with insurance legislation, prudential banking, accounting principles and taxation, just to name a few work topics.
Isn’t the United States smarter than Europe waiting to see how the MiCa will do to refine its regulation?
Smart? It seems to me that the role of the legislator is not to play “the smartest”. His goal must be to protect the general interest – and not to defend the private interests of a few – to protect consumers and financial stability or fight against the many excesses of the sector.
Do you understand that so far the crypto ecosystem in France and Europe fears the United States more than Europe?
Above all, I understand that consumers should fear this market as it stands, because it is unregulated, and invest in it only what they are really willing to lose.
Web 3 is already changing our relationship with financial products (decentralized finance that also allows you to grant loans or credits), with payments (cryptocurrencies that promote financial inclusion in some countries, etc.) with real estate (tokens). .. How can you not see the revolution going on?
The revolution underway? Financial inclusion? Like the one that happened in El Salvador where almost 80% of the population believes that the state shouldn’t invest an extra cent in bitcoin? Not to mention that with the collapse of Bitcoin, El Salvador is now in trouble 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 tying their destiny to a highly speculative and volatile financial asset.
Let’s be a bit serious, if this sector is to thrive, it has to come up with elements of language, permanent self-promotion. The gap between rhetoric and reality discredits it a little more every day… After that, there are useful applications of the blockchain, in terms of controlling and systematizing tax practices, for example. But this technology is too often used to justify breaking the most basic rules. Under the pretext of not holding back a nascent sector, we have accepted for too long that it does almost everything.
More and more American banks are offering cryptocurrency services, why do you think French banks are still not going down this path?
I think we have to be careful with the figures proposed. I also don’t view the links between regulated and unregulated finance very favorably. If the many cryptocrashes that occurred this year have not had dramatic consequences for the rest of finance, it is precisely because the bridges between crypto assets and traditional assets remain rather limited. Alright then. Otherwise the contamination effect would have been much greater, and financial stability at stake. Globalized finance is already part of a precarious balance that we are trying to somehow ensure through regulations and regulations. Let’s avoid adding a destabilizing factor by linking it to an even more unstable sector. Until cryptocurrencies are regulated, the links between crypto assets and so-called traditional finance shouldn’t have increased.
Economy Minister Bruno Le Maire wants France to be the “base camp” for cryptocurrencies and DeFi in Europe, what do you think?
Which is definitely a great visionary. It’s this same finance minister who didn’t know what a super-profit was, right? Unlike all European and international institutions and also our legislation. The government tirelessly repeats the same language: it wants to encourage innovation without forgetting regulation. The reality is that it only fills half of this roadmap. Of course, the government is making its eyes on cryptocurrency players, the president receives the head of Binance. But at the same time, the rules implemented with the PSANs are completely insufficient. Worse, it gives the illusion of a regulated industry, which is always the best way to do nothing concrete and drive consumers into the wall.
I also wrote to the Minister on this subject, emphasizing the fact that only accreditation effectively imposes standards in terms of transparency, good governance and consumer protection. However, neither platform is approved. Worse yet, they play on this vagueness between registration and approval to fool consumers into claiming they have the MFA label, without having any serious obligations.
In April, you mentioned in our columns that you would be working on how crypto-assets and blockchain pose new challenges in the tax area. Have you made progress on this axis?
It is obvious that we need to work to better adjust our taxation to the arrival of these goods, which are financial goods and must be treated as such. Some work has been done, in particular by the OECD, to try to better define what they call chargeable events. Simply put, when is value created and how it should be taxed. These are also the questions we are asking the European Parliament in an attempt to provide a uniform framework at European level.
Last October, the European Parliament adopted a resolution, of which I was co-rapporteur, on the issue of new forms of taxation related to the blockchain and in particular on 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 asked the European Commission to launch a series of investigations into the tax treatment of crypto-assets within the EU, in order to bring out some good practices and move towards a unified 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 judge this initiative?
Binance and Elon Musk really make you dream: the man suspected, according to the Bloomberg investigation, of promoting money laundering through his platform and the one who is sabotaging his by blurring the lines between fake news more and more and debate of ideas. This raises a central question, however: in such a snag, how independent will Twitter be from Binance? My gaze is that of a person attached to democracy and worried 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 fare in a few months.