The PACTE Amendment Act in France

In recent years, France has become the most attractive country in Europe for foreign investors,[1] with Switzerland being the largest investor.[2] Swiss Crypto-Asset Service Providers (CASPs)[3] which are considering expanding their business to France can benefit not only from its linguistic proximity, but also from the advantages associated with its economic and regulatory conditions. In light of recent developments in the crypto industry and the EU Markets in Crypto-Assets Regulation (MiCAR) coming into effect, France now updates its crypto licensing regime, applicable as of January 1, 2024. This article provides an overview of the evolution of the French regulatory crypto framework with a focus on potential advantages for Swiss CASPs planning to operate in France.

PACTE Act and the evolution of French crypto regulation

The Law on Business Growth and Transformation (“PACTE Act”) of 2019 introduced the mandatory registration for CASPs with the Autorité des Marchés Financiers (AMF), France’s principal financial authority. This mandatory registration applies to CASPs established in or providing services in France and operating in the fields of crypto-assets custody, buying or selling crypto-assets, trading of crypto-assets, and the operation of a trading platform for crypto-assets. Registration of CASPs is subject to the compliance with requirements related to the competence and good reputation of their executive managers and beneficial owners, as well as regulations on anti-money laundering and combating the financing of terrorism. In addition, the PACTE Act provides for optional licensing. The optional licensing procedure is stricter than the mandatory registration procedure as it requires, for example, an establishment in France and the implementation of enhanced measures in terms of professional indemnity insurance, as well as public information on pricing policy and claims handling procedure. However, a license provides CASPs with competitive and reputational advantages in the French market, as, for example, the French Consumer Act allows certain advertising and sponsorship activities only for licensed CASPs. To date, the AMF has registered 109 CASPs, of which two have been delisted, and has licensed one CASP, the “Société Générale – Forge”, on July 18, 2023. It is important to note that the provision of crypto-asset services under the PACTE regime is limited to France, so that “passporting”, i.e. an extension of the registration or licensing to other member states of the EU, is not possible.

Strengthening requirements for CASPs starting in 2024

The PACTE Amendment Act of 2023 strengthens the requirements for CASPs. It considers both the bankruptcy of the FTX platform and MiCAR, which will harmonize the rules applicable to the provision of crypto-asset services in the member states of the EU.[4] As of January 1, 2024, in order to be registered, CASPs will additionally have to demonstrate adequate security and internal control systems, a system to avoid conflicts of interests, and a resilient and secure IT system. Thus, this so-called “enhanced” registration will be similar to the former optional licensing regime. The new regime will be fully applicable to all CASPs whose application is not considered complete by the AMF on July 1, 2023. However, CASPs already registered, or those whose registration application has been deemed complete before July 1, 2023, benefit from a “grandfather clause”, that means that they will not be affected by the new requirements.

MiCAR license regime in France

As of December 30, 2024, MiCAR requires all CASPs operating within its scope and planning to establish a company or branch in France to obtain a license from the AMF. Once licensed, the CASP will be able to passport the provision of crypto-asset services throughout the EU. A transitional period is foreseen for CASPs registered or licensed by AMF before December 30, 2024, and for services not subject to former mandatory registration, such as the crypto-assets portfolio management or the advice to investors in crypto-assets. At the end of the transitional period, i.e. latest from July 1, 2026, all CASPs will be subject to the stricter and more comprehensive MiCAR license regime.

Why Swiss CASPs should consider France’s regulatory expertise?

France has been a pioneer in the regulation of CASPs, establishing a specific and innovative regime that inspired MiCAR. As a result, Swiss CASPs planning to expand their business to France should anticipate the transition to MiCAR and benefit not only from an experienced regulatory framework, but more importantly, from extensive experience and regular interaction with the AMF. This fact should not be underestimated from a Swiss perspective, as it gives France a competitive advantage over those of other European jurisdictions that have had little or no regulatory experience in dealing with CASPs in recent years. The AMF has also indicated that it is considering the possibility of a “fast-track” license for applications that will be submitted between December 30, 2024, and July 1, 2026, by entities registered under French law on December 30, 2024. In other words, it is worthwhile for Swiss CASPs to consider establishing a French branch to provide crypto-asset services within the EU even before MiCAR comes into force on December 30, 2024, in order to benefit from longer and more advantageous transitional provisions of a stable regulatory framework.

If you are interested in exploring your business options in France, feel free to contact us.