The MEP returns to the urgency of regulating this sector in Europe, going 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 MiCa (Market in Crypto Assets) regulation, which allows Europe to regulate cryptocurrencies, will come into force 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 broadly, cryptos are financial assets and should be treated as such. I have always argued for integrating 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 is clear that my fears turned out to be correct.
Could the regulation be further modified by the time it comes into force so as to stick to reality, especially in the context of the collapse of FTX?
The reality of the sector is the bankruptcy of FTX. It’s that of Voyager or Celsius, and the thousands of customers who find themselves prevented from recovering their money. It is the disintegration of Terra/Luna, yet presented as one of the strongest stables on the market. Each time, these are blocked accounts, bank runs, Ponzi pyramids, lack of equity, market manipulation, non-compliance with the best execution order… not to mention the most basic scams. There is therefore an urgent need to regulate and to really regulate, because the PSAN in its registration version is above all a matter of “regulation washing”. The urgency is to apply MiCA as soon as possible.
What will this regulation really change for investors?
Until now, the crypto market did not meet 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 crypto-assets in Europe. It first sets out to define what are crypto-assets and crypto-asset service providers in order to create a single framework for these providers. There are a number of obligations in terms of best execution orderconsumer protection, the fight against market manipulation and money laundering.
The European Parliament is expected to draft a report on NFTs this year, which will be forwarded to the European Commission. Will you be involved in the development of this report?
I can’t tell you yet if I will be in charge of this subject or if it will be one of my colleagues. Crypto trolls and self-proclaimed experts seem to have made me their prime target. However, the question of the regulation of cryptos represents only part of the files that I manage on a daily basis. I also work on insurance regulations, banking prudential, accounting standards and taxation, to name just a few work topics.
Isn’t the United States smarter than Europe while waiting to see how MiCa will set itself up, so as to refine their own regulations?
Smart? It seems to me that the role of the legislator is not to play “the smartest”. Its objective must be to protect the general interest – and not to defend the private interests of a few – to protect consumers and financial stability or to fight against the many excesses of the sector.
Do you understand that the crypto ecosystem in France and Europe fears the United States more than Europe so far?
Above all, I understand that consumers must fear this market as it is, because it is not regulated, and only invest in it what they are really ready to lose.
Web 3 is already changing our relationship to financial products (decentralized finance which also makes it possible to make loans or credits), to payments (cryptocurrencies which promote financial inclusion in certain countries, etc.) to real estate (tokens)… How not see the revolution in progress?
The ongoing revolution? Financial inclusion? Like the one that took place in El Salvador where nearly 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 difficulty vis-à-vis 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 financial asset and volatile.
Let’s be a bit serious, if this sector wants to prosper, it has 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 applications of the blockchain, in terms of auditing and systematizing tax practices, for example. But this technology is too often used to justify non-compliance with the most basic rules. On the pretext of not restraining a nascent sector, we have accepted for too long that it does 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 put forward. Furthermore, I do not see very favorably the links between regulated and unregulated finance. If the many cryptocrashes that have taken place this year have not had dramatic consequences on the rest of finance, it is precisely because the bridges between crypto assets and traditional assets remain quite limited. And that’s good. 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 somehow to ensure through regulations and regulations. Let’s avoid adding a destabilizing factor by attaching it to an even more unstable sector. As long as cryptos are not regulated, the links between crypto assets and so-called traditional finance should not be increased.
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. It is this same Minister of the Economy who did not know what a superprofit was, is not it? Unlike 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 roadmap. Admittedly, the government is making eyes at crypto players, the President receives the boss of Binance. But at the same time, the regulations implemented with the PSANs are absolutely insufficient. Worse, it gives the illusion of a regulated sector, which is always the best way to do nothing concrete and send consumers into the wall.
I have also written to the Minister on this subject, pointing out the fact that only accreditation effectively imposes standards in terms 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 label, without having any serious obligation.
In April, you said in our columns that you were going to work on how crypto-assets and blockchain pose new challenges in the tax area. Have you made progress on this axis?
It is obvious that work is needed to better adapt our taxation to the arrival of these assets, which are financial assets and should therefore be treated as such. A certain amount of work has been carried out, in particular on the side of the OECD, to try to better define what they call the taxable events. Simply put, when is value created and how should it be taxed. These are also the questions that we are asking ourselves in the European Parliament in an attempt to provide a uniform framework at European level.
Last October, the European Parliament adopted a resolution, for which I was co-rapporteur, on the question of new forms of taxation linked to the blockchain and in particular the question of the 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 number of assessments concerning the tax treatment of crypto-assets within the EU, in order to bring out a number of good practices and move towards unified regulation on a European scale.
The giant Binance wants to help Elon Musk promote adoption of cryptocurrencies on the social network. How do you view this initiative?
Binance and Elon Musk, it really makes you dream: the man suspected, according to the Bloomberg investigation, of promoting money laundering via his platform and the one who is sabotaging his by always blurring the limits a little more between fake news and debate of ideas. This nevertheless raises a central question: in such a hitch, how independent will Twitter be from Binance? My look is that of a person attached to democracy and who is worried about such an alliance.
Maybe 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. That would be a really interesting and innovative initiative. But let’s wait and see how these two companies will do in a few months.