Crypto-assets: “It is our duty to build the finance of tomorrow together” by Pierre Person, Member of Parliament for Paris

Crypto-assets, led by Bitcoin, both fascinate and provoke criticism. And rightly so, because they foreshadow what tomorrow’s world might—and likely will—look like: a digital world that is more efficient, more inclusive, and more decentralized.

Whether we like it or not, this revolution will affect everyone.Right before our eyes, we are witnessing a user-driven revolution which, like others spurred by human creativity and technological progress, cannot be stopped—neither by governments nor by the all-powerful GAFA. On the one hand, because this revolution is based on technology that is entirely digital, but above all decentralized, beyond the reach of governments and mega-corporations; on the other hand, because it is merely the continuation of an even larger movement aimed at liberating and restoring power over control and choice, as well as meaning to individual decision-making. But we must not delude ourselves: this great battle for the digital renewal of our societies will confer major competitive advantages on those who win it. In this regard, it is the duty of France and Europe to mobilize to ensure the full sovereignty of their citizens—of each and every one of us.

In an ecosystem built on libertarian principles, the state is often criticized. Our ecosystem has at times been built in opposition to regulation, which, it is true, can sometimes hinder innovation, but remains essential for protecting the most vulnerable and for building a society. Innovation is not possible in a chaotic, Darwinian world. In this regard, I would like to remind everyone that the state is an extension of who we are. It is a part of us. There is no corporation or conspiracy lurking behind the state—behind the public sphere in general. However, the state, its elected leaders, and its public servants reflect our society, which is full of contradictions. Sometimes averse to change and often preferring the comfort of the familiar, content with small compromises in a form of procrastination that protects the status quo at the expense of risk and the unknown. 

So to those who view regulation as an absolute evil, the response must be that, on the contrary, it is a driver of growth, forit is through stability, through transparent rules that foster fair competition among economic players, and above all through consumer protection, that France has worked and will continue to work to attract the talent and capital that will build tomorrow’s prosperity.

Conversely, while France has opted for a clear and strict regulatory framework to achieve this, it must also prevent unfair competition between our domestic companies and foreign firms from taking place on its physical and digital territory. All too often, those who play by the rules are at a disadvantage in international competition that favors those who are not bound by the same regulations. 

It is our role as policymakers and regulators to ensure strict fairness in the regulation of the digital sector.It is unacceptable for foreign entities to reach French customers by circumventing national laws and without providing them with the same protection as our regulated companies. In this sense, the goal is not to regulate for the sake of regulation. Europe already protects its citizens through the GDPR, but its implementation remains patchy when it comes to major data holders like the American GAFA companies. Good regulation must therefore be able to rely on strong, local players who respect not only our rules, but also our visions, customs, and values. This is how we will protect our citizens. However, when it comes to blockchain and these crypto-assets, technology is our best weapon, far surpassing any regulation that claims to be all-powerful. We regulate only when technology is imperfect, when it reveals flaws and makes abuse possible. But blockchain is today the technology best suited to help us combat terrorist financing or money laundering, to ensure strict fairness in financial markets, and to guarantee true transparency regarding the use of our savings. We are talking here about a decentralized technology, and therefore one free from censorship or arbitrariness, completely secure, and perfectly transparent, subject to pseudonymity that protects our privacy. This is not about singling out blockchain and crypto-assets and stifling them under a flood of technical rules. For while the technology is neutral and pure by nature, it is its uses that we must control and regulate. It is in this regard that the responsibility of professionals in the sector is immense.

To protect consumers from those who use technology for malicious purposes, security is our best weapon.In my view, it is the cornerstone of any effective regulation. However, the government cannot do everything on its own. It must be able to rely on private-sector specialists who are constantly developing innovative solutions to ensure the security of our funds in this still-maturing ecosystem. We are fortunate in France to have the global leader in this field, Ledger, which upholds this standard.

As early as 2017, we sought to stay one step ahead and lay the groundwork for regulationsthat would, on the one hand, ensure consumer protection and, on the other, provide a clear and reliable framework for industry professionals. At the time, we were the first in Europe. While this regulatory framework was incomplete in 2019, it at least had the advantage of not stifling innovation to the point of causing its demise. However, it remained fragmented, and in the face of developers’ ingenuity, it must now be expanded—if not overhauled. However, it must be acknowledged that France has lost the lead it held in 2017. But regulation alone does not determine the success or failure of an ecosystem—it is, above all, a collective effort.

It is now clear that many issues continue to hinder innovation in our country. Some of theseare new challenges that have emerged alongside new innovations. However, there are still difficulties today that existed when we drafted our first report in 2019 and that remain unresolved to this day. Politicians, regulators, banks, industry professionals, and the media—both general and specialized—these challenges are now everyone’s concern. Our level of commitment must match the challenges that these new digital opportunities present to our societies. Indeed, crypto-assets and blockchain are shaping the world of tomorrow: a world that is increasingly digital, increasingly efficient, and serving everyone, regardless of wealth, religion, skin color, or sexual orientation.

We are currently witnessing the emergence of a “value-based internet,” one that could be free from the influence of the hegemonic GAFA companies and managed collectively by its users. This prospect compels us to shift paradigms and envision a world that will no longer be centralized and vertical, but decentralized and horizontal. It compels us to rethink how we conceive of social and economic relationships, and to rethink our regulatory model.  Already today, certain unbanked populations in the Global South can easily access payment and financial services without having to bear the prohibitive fees charged by their banks. It is in this sense that El Salvador, a small Central American country without a national currency, made the much-discussed decision to adopt Bitcoin as legal tender. Closer to home, in the future, banking processes will be optimized on the blockchain; the exchange of value, whether domestic or international, will be carried out in record time and at minimal cost. Furthermore, low-income households in Europe will finally be able to access new, more profitable types of savings based on fractional real estate or decentralized lending.

The collective effort of building an internet of value can only succeed if every stakeholder takes responsibility and does their part. First and foremost, the regulator. Regulatory compliance is a significant barrier to entry in terms of both cost and time—yet the crypto-asset and decentralized finance sectors evolve over very short timeframes, sometimes spanning just a few months. With fierce international competition and intense comparative legal scrutiny, France—though full of determination—sometimes lags behind American pragmatism or Chinese state centralism. It is essential that the records and decisions of regulatory authorities take this sustained evolution into account. This obviously raises the question of the resources allocated to these authorities. Clearly, these resources are insufficient today, but they will need to be sufficient in the near future. The regulator must ride this rising wave by allocating more resources to it. To this end, I will advocate through the budget bill that our regulators be given the necessary resources to expedite timelines and procedures. 

But on an even deeper level, the regulator must, in my view, move beyond the military mindset that Napoleon instilled in it more than two centuries ago.It is no longer simply a matter of ensuring that our entrepreneurs do not violate our national regulations; it is about ensuring that they are capable of representing the interests of France and Europe in a globalized economy. In reality, we must shift our perspective. We can no longer think solely in terms of our French market, given that we have been integrated into a common European market for several decades. We must no longer prioritize standards before innovation, but rather innovation first, and standards only afterward. We should take advantage of these new perspectives to rethink our regulatory approach to innovation: positioning regulatory authorities in a supportive role—more so than they already are—rather than one of control and sanctions; experimenting with “sandbox” regulations, where entrepreneurs innovate within a flexible framework and under the supervision of regulatory authorities. 

Prioritizing contracts over the law.That was the intent of the PACTE Act, and in this regard, I would like to acknowledge the work accomplished and the vision championed, in particular, by the AMF in its relations with industry stakeholders—which demonstrate, once again, that we are up to the challenge. We must not lock ourselves into a stifling mindset that seeks to force these innovations into the predefined boxes of the 5th Directive or other European regulations. Such an approach would only cement the lag of France and Europe behind our international competitors, who are far more agile than our domestic players. Blockchain, crypto-assets, decentralized autonomous organizations (DAOs), … all these innovations force us to shift paradigms and conceive of the world differently. How can we today regulate an entity that has neither a legal form nor a physical presence, whose leaders are unknown, yet which is capable of managing hundreds of millions of dollars or euros in a fully automated manner? On this point, the regulations proposed in the draft MiCA regulation do not meet this need for regulatory rethinking. But this is a battle of conviction that we must fight to collectively bring this vision to fruition.

In this broad campaign to promote innovation, politics obviously plays a major role. Politicians are also accountable for their decisions—a fact that crypto professionals have learned the hard way. The messages conveyed by political leaders greatly influence how the media covers a sector. Crypto-assets, often accused of being a slush fund for criminals and terrorists, currently face negative press within legislative bodies and government agencies. In this regard, it falls to me today to distance myself from the recent caricatured views of certain politicians—views all too often amplified in the media—and to champion a long-term vision for our ecosystem. The role of a politician is to be a visionary. In a world driven by a perpetual race for innovation, a wait-and-see attitude and technological certainty are criminal errors that have led our Old Continent to miss every innovation train for nearly 20 years.

When it comes to France, we used to be the nation of Pasteur, the Ariane rocket, and even the TGV. Today, disruption after disruption, we’re missing the boat. And yet, far from engaging in French bashing, we have key assets in this constant race for innovation—our developers, our entrepreneurs, and our ecosystem as a whole. We have simply lost the ambition to put them to good use.

We have lost sight of the very long-term issues at stake behind these innovations: 

• We have classified crypto-assets as tools for financing terrorism, even though less than 1% of transactions are used for illicit activities—can we even estimate the proportion for cash? This is yet another strength of crypto-assets; and
• We’ve heard that Bitcoin consumes more energy than some countries and produces just as much pollution. But do we realize that a large portion of this energy comes from hydroelectric power plants, and that Bitcoin mining now allows us to use natural gas derived from oil that would otherwise be released into the atmosphere? French individuals, such as Sébastien Gouspillou, are working to finance hydroelectric power plants in the Congo—a country heavily dependent on coal—using Bitcoin mining.

At the same time, the role of policymakers is also to ensure that innovations are used responsibly—whether by entrepreneurs or the public sector—and to protect the public interest. In this regard, it is our duty to consider the relationship—which will soon emerge—between traditional finance and decentralized finance. It is also our duty to ensure that citizens do not become over-indebted on various platforms or find themselves in a precarious financial situation. Finally, it will also be our duty to encourage entrepreneurs and researchers to direct their efforts toward the greater good—by preventing a repeat of the GAFA phenomenon or by steering Bitcoin miners toward renewable energy sources. There is much to be done in this new world, and policymakers cannot afford to take an interest in the sector only when Bitcoin is in vogue.

Furthermore, for an industry to grow, it must be able to rely on reliable sources of funding that enable it to break into new markets. This is the foundation of modern capitalism. However, in the first parliamentary report submitted in 2019, we had already highlighted the issues surrounding access to bank accounts for crypto-asset professionals. Consequently, we enshrined in the PACTE Act the principle of a right to a bank account for all crypto-asset companies. Nevertheless, it must be acknowledged that this right to a bank account, while fundamental in principle, has not been effectively implemented in the daily lives of our crypto entrepreneurs. Even today, they continue to face difficulties in opening a bank account and are sometimes forced to conceal their crypto-asset activities to avoid having their accounts abruptly closed. Indeed, banking and financial institutions are subject to particularly stringent regulatory requirements, particularly regarding the fight against money laundering and terrorist financing. However, it seems clear that the leaders of our major French banks have not yet fully grasped the stakes involved in developing a robust crypto-asset ecosystem. 

In addition to the sovereignty issues mentioned earlier, the rise of decentralized finance will have a fundamental impact on our banking and financial system.It is in all our interests that this system not be abruptly destabilized by this new technological revolution, which, conversely, could contribute to its modernization if properly adopted by existing institutions. In this race for crypto-assets, banking players bear as much responsibility as policymakers and regulators. It must be acknowledged that their choices are not solely dictated by regulatory constraints but also reflect their assessments of a technology that is still in its infancy yet possesses significant disruptive potential.

Thus, society as a whole must be capable of fostering major national and European players who can make their mark on the international stage.In this regard, these players bear an immense responsibility toward society. In addition to the constant pursuit of innovation, new technologies must take into account the constraints inherent in our society that shape how we live together. This is particularly true regarding the tracking of funds used for illicit activities, the security of funds against fraud and technical vulnerabilities, and the protection of inexperienced consumers. Yes, there are risks associated with the development of crypto-assets and DeFi. It is therefore up to industry professionals to provide solutions to limit the harmful consequences of these new technologies or their misuse. This is already happening, as several companies have become experts in analyzing data and transactions to ensure the lawful use of funds—a practice widely recognized today—or in decentralized governance solutions, through reserve funds and decentralized protocols. We must go even further and remain committed to the imperative need to preserve the security, transparency, and efficiency of tomorrow’s digital world. Only in this way can the innovations emerging from this ecosystem become widely accessible.

Because, in reality, this is all about sovereignty. Yet, on this point, we are currently at a pivotal moment, and our European model stands at a crossroads. Europe must rediscover its ambition and chart a middle path between the hegemony of the American private sector and the all-encompassing power of Chinese statism. This rivalry is already raging in a particularly sensitive area: currency. The United States is already leveraging the dominance of dollar-backed stablecoins to reinforce the dominance of its currency in this new digital world; China, for its part, is already rolling out the digital yuan to move toward ever-greater state control and ever-greater oversight of citizens for the benefit of the single-party state.

Yet the Old Continent has never been more deserving of that nickname. We have the world’s most brilliant experts, but European regulators refuse to try to understand the upheavals unfolding before their very eyes and, worse still, prefer to cling to the rules of the past rather than secure our future sovereignty. Among Europe’s great achievements, we can note the creation of a common currency for 19 different states. Although imperfect, the euro is today one of the most reliable currencies in the world, ensuring monetary stability that particularly protects citizens. But the euro’s privileged position is now threatened by the emergence of digital assets, foremost among which are stablecoins and other central bank digital currencies (CBDCs). The urgent priority for Europe is therefore to rapidly develop a digital euro. 

But we shouldn’t develop a digital euro just for the sake of it; if we want it to compete with thealready well-established U.S. stablecoinsand withstand the dominance of the digital yuan, we must ensure the conditions for widespread adoption of the digital euro. European leaders—whether central bankers, European commissioners, or parliamentarians—must, even before promoting the concept of a digital euro, agree on what it should be: a wholesale currency, a retail currency, or both; centralized, decentralized, anonymous, or traceable; commercial currencies that simply modernize the traditional monetary model, or central bank currencies that replace cash; a claim by individuals against the ECB, enabling various innovative monetary mechanisms such as “helicopter money” in response to the sometimes harmful policy of Quantitative Easing. The challenge is to ensure that neither the state nor commercial banks can influence citizens’ spending, control their use of money, or sell the resulting data to private companies.

The digital euro must therefore, in accordance with Europe’s personal data policy, protect citizens’ privacy and not grant undue powers to commercial banksthat might host accounts, etc. The fundamental issue at stake is citizens’ trust. This is true for fiat currency—our coins and banknotes—and it will also be true for digital currency. So today, I call on the Governor of the Bank of France and the President of the ECB to take all these issues into account and to clarify their respective positions quickly so that Europe does not fall behind. But these considerations must not be addressed in three or five years’ time. The battle has already begun—dollar-pegged stablecoins are already dominant; the Chinese yuan is already beginning to take root in people’s lives. In the time remaining before we have a functional digital euro, we must not deprive ourselves of a euro-pegged stablecoin—which would meet a genuine demand. It would be a terrible misjudgment on the part of the European Commission and the ECB.

At the same time, the digital euro will also necessitate a fundamental overhaul of our financial and monetary systems. Indeed, given that our current monetary policies are no longer sufficiently effective to ensure a sustainable recovery of our European economies, the question arises of new monetary instruments that can more directly stimulate growth through consumption and investment. Beyond the equally fundamental debates regarding the European fiscal framework and the trajectory of our public spending, the digital euro could, in the future, enable the European Central Bank to inject liquidity directly into businesses and households, bypassing a banking and financial system that currently captures too large a share of this liquidity. This “helicopter money,” while previously difficult to implement, will become a genuine variable of monetary policy in the coming decades.

As for me, I take my responsibility as a politician very seriously. I ensure that my understanding of the sector is always aligned with the concrete needs of professionals in the ecosystem. When Congress reconvenes, I will put forward proposals to help this collective ambition take shape. And, together with other lawmakers, we will step up to the plate to take this fight to the executive branch and the administration. Among the proposals I will put forward—and I have already touched on some of them in my presentation—I would first and foremost like to bring regulatory clarity to an ecosystem that is evolving at a breakneck pace—providing definitions that are not restrictive but rather structuring for the various activities related to crypto-assets and decentralized finance (NFTs, staking, etc.) in order to unify the regulations. Tax clarity—by supplementing the various regimes implemented in 2019 and addressing the reporting challenges related to capital gains.

But I would also like to propose a new regulatory paradigm, based on “sandbox” regulation, where innovative entrepreneurs are free to explore the possibilities offered by the technology in which they specialize without having to become experts in tax law or financial regulations. It is with this approach that we will then be able to fully explore the opportunities presented by STOs and DeFi.

When we began our parliamentary work on this topic in 2017, the women and men we met—some of whom are still here in the audience or on stage—were pioneers. Today, four years later, we are all builders, shaping the future of finance and the digital world of the 21st century. And in this massive undertaking, we all have a brick to contribute.