Banque de France, the French central bank published an official statement about the cryptocurrencies in which it expressed its opinion towards this topic. Moreover, the bank requested from the French authorities to develop a regulation that would allow better protection of the users dealing with this type of financial instruments.
The bank admitted the cryptocurrencies have found their way into the so-called real economy. Moreover, the statement recognizes the potential of the cryptocurrencies as a mean of investment and financing with the appearance of the initial coin offerings (ICOs).
However, despite these positive elements, the French central bank insists that the cryptocurrencies present high risks for the investors and their users in general and that is why the bank pointed out the necessity to establish a broad and firm regulatory frame.
It is important to point out that the Bank of France does not consider the cryptocurrencies to be a legal tender and it highlighted their volatility, the lack of intrinsic value and the absence of supervision and regulation as some of their weak points.
Additionally, the French central bank emphasized that this type of assets does not depend on any real characteristic and are emitted through computer power, independently of the necessities of the economy and its exchanges, which prevents them from having an intrinsic value.
The bank says in its statements: “Moreover, as exchange intermediaries, the cryptocurrencies are a lot less effective than the legal tender, since the volatility of its price makes it harder every time to use them as a method of payment; lead to transaction costs that are disproportionate for simple retail operations; they do not offer any refund guarantee in case of fraud.”
On the other hand, the only legal currency in France, according to Banque de France, is the euro and the cryptocurrencies are not recognized as a legal tender, nor a method of payment. For the French central bank, the cryptocurrencies have the characteristics of a speculative bubble and it compares the behavior of bitcoin with the tulip mania in the 17th century.
Moreover, the bank adds that the cryptocurrencies also do not comply with the definition of methods of payment in the sense of the Monetary and Financial Code, nor with the definition of electronic money. As a result and unlike the electronic money, the cryptocurrencies do not have a legal refund guarantee in the European Union in the case of unauthorized payments.
After stating the dangers associated with the cryptocurrencies, the Banque de France expressed the urgent necessity to establish a new regulation and pointed out four main reasons for this: the fight against the money laundering and the financing of the terrorism, the protection of the investors, the preservation of the integrity of the markets and the repercussions that the increased usage of cryptocurrencies could have on the financial stability.
This regulation should regulate the services offered by cryptocurrency exchanges that act as intermediaries between the buyer and the seller. Moreover, the French central bank and the French Prudential Supervision and Resolution Authority (ACPR) advocate for an extension of the regulatory frame applicable to the benefits associated with the cryptocurrencies.
The central bank of France proposes a supervision of the investments in cryptocurrencies and that the regulatory frame contemplates a limitation of the possibility that certain regulated companies (banks, insurance companies, administration companies, etc.) are related with these financial instruments. This, according to the statement, could start with a ban of the deposits and loans in cryptocurrencies.
Moreover, the central banking institution of France contemplates the necessity for inter-institutional collaboration on an international level, with the goal of guaranteeing a better efficiency of the regulation. This initiative is impulsed especially by the nature of the cryptocurrencies, their practicality at the time of providing cross-border monetary services and the search for a uniform regulations compliant with the laws in different countries.
The Autorité des marchés financiers (French financial markets authority – AMF) published an official statement in which it said the derivative products of cryptocurrencies, such as the future contracts, would be traded according to the relevant permits and could not be publicized through online services. This shows us this is not the first time that the French institutions touch the subject of the regulation of the cryptocurrencies.