The year 2023 is a pivotal year for the digital asset sector in France, as it marks the implementation of a new registration regime for digital asset service providers (PSAN)[1]. From 1 January 2024, a reinforced registration will definitely be in force, with stricter requirements for service providers wishing to offer their services to the 8% of French people who are appropriating this new asset class. However, PSANs wishing to file for registration will have to prepare for these new requirements as of 1 July 2023.

In this publication, Adan wishes to raise the awareness of PSANs wishing to file a registration file on the changes in regulations and the requirements of regulators for the granting of an authorisation to carry on their activity in France.

Context: towards the imminent strengthening of the framework applicable to service providers subject to registration under Article L. 54-10-5 of the Monetary and Financial Code

The law containing various provisions adapting to European Union law in the fields of the economy, health, labour, transport and agriculture (the “DDADUE” law) was published in the Official Journal on Friday 10 March 2023. Among the subjects it deals with, it reforms the regime applicable to PSAN registered with the Autorité des marchés financiers (AMF) upon the approval of the Autorité de contrôle prudentiel et de résolution (ACPR).

➡️ See “Draft DDADUE law: what is the outcome for crypto markets?”

The provisions resulting from the DDADUE Act are part of a reflection initiated, following the bankruptcy of the FTX platform, on the regime applicable to registered PSAN. These provisions also take into account the forthcoming publication of the European Regulation on Markets in Crypto-Assets (“MiCA”), which proposes a harmonisation of the regulation applicable to the provision of services on crypto-assets in the Member States of the European Union.

 

New requirements for full filing from 1 July 2023

Until now, the registration of PSAN was mainly conditional on compliance with requirements relating to the competence and good repute of their shareholders and managers, and obligations relating to the fight against money laundering and terrorist financing.

The DDADUE law reinforces these requirements. With this reform, in order to be registered, PSAN will also have to comply with the requirements set out in paragraphs 5° and 6° of the newly created Article L. 54-10-3, including: having an adequate security and internal control system, a system for managing conflicts of interest, and a resilient and secure IT system; communicating clear, accurate and non-misleading information to their clients; publishing their pricing policy; and implementing a policy for handling complaints.

Note that custody service providers will also have to comply with certain additional provisions specific to this activity, including establishing a custody policy, and segregating holdings on behalf of their clients.

Watch out for the transition to the enhanced regime!

The new enhanced registration procedure will thus come into force pending the implementation of the European CASP (Crypto-assets Service Provider) approval provided for by the MiCA (Markets in Crypto-Assets) Regulation.

Before 1 July 2023

The AMF will accept registration applications under the current regime until 30 June 2023 – provided they are complete[2]. 2] The Association draws the attention of market participants to the fact that if a registration file submitted before this deadline does not fully meet the expectations of the regulatory authorities in relation to the current provisions, it will be processed under the enhanced regime and will therefore have to be completed to meet the additional requirements.

Adan alerts PSANs applicants to the substantial time required to process an application for registration leading to the finalisation of a complete file. In this respect, new applicants should be prepared for the possibility that a file not submitted before April 2023 cannot be processed by the AMF under the current registration regime. The Association therefore urges companies to anticipate the need to comply with the enhanced regime for applications that have not yet been sent to the AMF.

Adan also recommends that companies file their applications with the AMF when the project and the associated business model are as mature as possible and unlikely to change substantially during the AMF’s review. This limits processing time and keeps the AMF’s departments efficient, which benefits not only the application in question but also all applications.
If a PSAN wishes to file an enhanced registration application before 1 July, it should be deemed admissible by the AMF, which wishes to encourage this transition.

After 1 July 2023

Between July 2023 and January 2024, the AMF will continue to register PSAN that have filed a complete application before 1 July 2023 under the initial registration regime.

Then, from the end of 2024, digital asset service providers will have to comply with the European MiCA regulation, which will replace the French regime. It is therefore crucial that DSPs are well informed of these changes and prepare in time to comply with the EU regulation.

It should be noted that PSAN registered (under the strengthened regime or the initial regime) and authorised by the AMF before the MiCA regulation comes into force will have a tolerance period of 18 months from the date of entry into force to comply with the European rules.

Adan therefore recommends that market participants take the necessary steps to comply with MiCA requirements before it comes into force, especially those mentioned in Article L. 54-10-2 5° of the Monetary and Financial Code, which are not subject to mandatory registration and will have to obtain CASP authorisation if they wish to operate in Europe.

Although the text has not yet been fully finalised, its publication in the Official Journal of the European Union is imminent and Level 2 and Level 3 measures drafted by the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) will provide clearer guidelines for players.

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[1] Law No. 2023-171 of 9 March 2023 on various provisions for adapting to European Union law in the fields of the economy, health, labour, transport and agriculture (DDADUE), Article 8
[2] DDADUE Act, Article 8 paragraph II