Heated discussions on the state of the relations between the bank-finance and the crypto-blockchain industries in France

On November 12, ADAN organized a webinar to present the results of his investigation on the relationship between the banking and financial sector and the crypto-assets industry.

During this online conference, which attracted around fifty professionals from the sector, Simon Polrot, President of Adan, and Faustine Fleuret, Director of Strategy and Institutional Relations, summarized the main findings of this survey.

Adan also received Quentin de Beauchesne, co-founder of Ownest and President of AssoCryptoFR. He presented the survey carried out in 2019 which reports the relationships that cryptocurrency users in France have with their banks – they are still numerous, with account closings observed in almost all French banks (more than 600 respondents).

For professionals, the Adan’s report presents a dire situation: excessively long time to enter into a relationship, impossibility to open an account, inefficiency of the “right to a bank account” system. This situation has persisted for nearly ten years, despite the sector’s willingness to engage in constructive dialogue with banking and financial players, to understand the obstacles and resolve them.

The VASPs and the right to a bank account

One of the issues raised during the webinar was the difficulty in accessing the “droit au compte” system, which consists in the Banque de France automatically designating a banking institution that is required to open an account for the applicant company. Since the arrival of PACTE law in 2019, a specific account entitlement procedure for VASP has been in place. Unfortunately, the actors who wish to use it find themselves in a loop – since access to the status of VASP itself requires a bank account, this device is totally inaccessible to them. Experience has also shown that VASP s who have managed to register are still unable to benefit from a bank account. 

Moreover, even if the right to account mechanism is a necessary recourse for professionals, it is not a solution. The accounts granted under this approach are extremely limited in terms of functionality and access to basic services such as online banking and means of payment.

The climate of mistrust that reigns in the banking and financial sector vis-à-vis the crypto ecosystem is based in particular on persistent prejudices about the lack of a regulatory framework for players, the risks of their activities for financial security, and fear of sanctions. However, crypto players, in particular VASP, are regulated entities and are subject to the same anti-money laundering and anti-terrorist financing (AML/CFT) and due diligence requirements as other financial players. This two-tier system is very damaging, whereas the registration and licensing VASP are regulated under the authority of the Autorité des marchés financiers (AMF) and the Autorité de contrôle prudentiel et de résolution (ACPR).

The response of the authorities and institutions

Adan actively participates in numerous working groups with the main authorities concerned by the issue, notably the ACPR, the AMF, the Banque de France and the Treasury Directorate General (DGT). Solving the problem of account access and, more generally, the difficulties encountered by crypto players vis-à-vis traditional financial players was one of the first tasks carried out by Adan with these authorities; they are now fully aware of the problem and are working to find solutions. 

In contrast, with regard to banking and financial institutions and their representative bodies, responses vary. They are generally less open to dialogue and pro-active than the authorities in solving problems encountered by crypto actors. 

The members of the parliament that are working on crypto issues, for their part, are very receptive and in demand for follow-up on this subject. They also carry the same messages as the Adan in their own exchanges with financial institutions.

Towards a crypto-native bank?

Will we soon see crypto players mobilizing to create a “crypto friendly” bank? This is the question asked by one of the participants. Indeed, the players in the crypto sector seem mature enough to create the services they are forced to ask banks for, but this is obviously more complex than it seems.  

In fact, this idea has been circulating for some time in the ecosystem and within the Adan. While the idea of creating a bank “for industry and by industry” is attractive, the creation of a new banking player remains largely inaccessible to the players in the sector.

Without talking about maturity, the first question is the regulatory issue. Obtaining the necessary authorisations for the provision of banking services, in particular the status of a credit institution and that of a payment institution, are steps that can be extremely cumbersome and very costly for relatively small players. It is mainly for this reason that the creation of a new bank by one or more crypto players is difficult to envisage. 

The crypto players are increasingly exiting traditional system

For some time now, there has been a trend that suggests that an alternative to the traditional financial system is possible. More and more native crypto players do not have a bank account and do not seek to open one. The maturity of the ecosystem makes possible a majority of the operations necessary for the proper functioning of a business (conservation of funds thanks to the stablecoins, loan tools on crypto, service providers that accept payments in crypto, etc.). This trend of “dogfooding”, consisting in using one’s own products, is spreading in the ecosystem and gives us hope on the viability of an alternative to the traditional financial scheme. This makes digital assets, cryptography and DeFi all the more meaningful.

Encouraging long-term signs

However, the latest exchanges that the Adan has been able to have with banking players, regulators and financial market institutions are encouraging. At a time when Europe is developing a comprehensive regulatory regime which will complete the institutionalisation of the sector, everyone is aware that digital assets is well established in the financial landscape. By dint of pedagogy, sceptics can then become pragmatic allies. There are signs that the process is well underway in France. It is clearly not fast enough for the optimal development of the sector in France. We hope that this survey and this report will contribute to these efforts!

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