French official wants to change how Europe regulates crypto and blockchain

France’s top financial regulator has proposed to change the way the cryptocurrency industry is supervised in Europe.

Robert Ophèle, chairman of Autorité des Marchés Financiers, addressed crypto-realted regulatory issues at the 5th Annual Conference on FinTech and Regulation. The official argued that financial supervisors must take a new approach in regulating blockchain-based financial instruments due to massive growth in the market.

Ophèle proposed that the European Securities and Markets Authority, or ESMA, should be the responsible authority for this new area of regulation and supervision. Ophèle emphasized that the current stage of regulation in the European Union would make it easier for the ESMA to develop guidelines and policies:

“As this regulation is brand new, it is easier to provide ESMA with competence from the outset than if this is considered at a later stage. Moreover, it would make sense to gather all the expertise within the same authority, since the cost of entry in the crypto-world is quite high.”

Located in Paris, the ESMA is an independent EU authority focused on safeguarding the stability of the union’s financial system by enhancing investor protection and promoting stable financial markets. In early 2018, the ESMA issued a joint warning that cryptocurrencies were highly risky assets, warning investors not to “invest money they cannot afford to lose.”

Ophèle also suggested more enabling regulations, including a regulatory sandbox for the security token industry. The official said that current rules hamper the development of blockchain technology as they were designed for centralized systems. Ophèle said that the decentralized nature of blockchain could play a crucial role in the European economy:

“DLT would reduce risks, both by speeding up the market chain and by its distributed nature that could mitigate some cyber risks raised by centralised market infrastructures, such as the single point of failure [...] It is also a question of keeping Europe competitive at a time when similar approaches are now being rolled out in many countries.”

The European Commission published its Markets in Crypto-Assets, or MiCA, regulations in September 2020, providing a legislative regime for crypto markets and relevant service providers. Major crypto companies including ConsenSys subsequently expressed concerns about the MiCA, warning that the new regulations could overburden the industry with costly and complex compliance and legal requirements.