Crypto License in France

The legality of cryptocurrency business in France

Until 2019, cryptocurrency businesses were in a gray zone in France. It was tolerated but easily sanctioned if it appeared that a law may have been violated.

In May 2019, as part of the 2019-486 law “On Growth and Transformation of Companies” (“PACTE” law), the PSAN (or DASP in English, for Digital Assets Service Providers) framework was created. The goal was to legalize and regulate crypto companies in France.

The first license was issued in March 2020 to Coinhouse, making it the number one French crypto exchange. Dozens of French and European crypto start ups followed.

DASP licenses in France are issued by the Authorité des Marchés Financiers (AMF), an independent institution for regulation of financial markets under the management of the Minister of Economy and Finances.

Facing a high number of applications and the upcoming pan-European MiCA regulation, the AMF brought additional requirements to the French crypto license. On July 1st of 2024, through amendments to the regulations, the AMF introduced the “reinforced DASP license” with additional requirements.

This makes the French crypto license one of the only options for crypto businesses willing to prepare the switch for the MiCA regulation, along with Estonia.

Cryptocurrency regulation in France

There are three legal texts that form the cryptocurrency regulation in France. Two of these texts are found in the Code Monétaire et Financier (Financial and Monetary Law). The third is a rule issued and enforced by the AMF directly.

The first one, the “DASP Chapter” (articles L54-10-1 through L54-10-5), defines what is a digital asset and what is a digital asset services provider. It is seconded by the “Chapter on Obligations Relative to Anti-Money Laundering, Countering the Financing of Terrorism, Gambling and Tax Fraud” (articles L561-1 through L564-2).

The third set of texts that regulates cryptocurrency in France is the Book VII of the General Regulations emitted by the AMF, “Token Issuers and Digital Assets Services Providers”. This book describes in detail the requirements and obligations to be met by applicants and holders of the French crypto license.

The current regulation was last changed in June of 2023 and the edits were enforced in July (with a grandfather right for already licensed companies until January 2024). The AMF wants to keep the current regulation until the enforcement of MiCA.

France Virtual Cryptocurrency Registry

The France Virtual Cryptocurrency Registry is public and can be found on the website of the AMF. It sums up every company who successfully secured the DASP license in France. The register incldes details such as the company name and number, the contact details and the crypto activities which it is allowed to provide, according to their registration.

We also find that the registry is composed of two lists, one for each kind of licenses issued in France: the DASP Registration (Enregistrement PSAN) and the DASP Certification (Agrément PSAN).

The French DASP register also includes information about formerly licensed companies, including the reason why they are not licensed anymore.

Crypto-authorization process in the France Virtual Currency Registry

We can describe the crypto authorization process in France as a hybrid licensing process. The AMF has described very clear requirements to be met. However, some elements will be assessed on a per case basis and require properly designed, non standardized legal documents, in order to successfully get the France crypto license.

The registration of France Company in Register of crypto currency companies

The French regulator, the AMF, is notorious for helping applicants with their file. There are little to no cases of refusal to be licensed, because the AMF is willing to assist crypto projects until they meet all their requirements.

On the down side, this means that certain applications can last for a very long time (more than a year and half). Registering a company in the register of crypto currency companies in France is known to be a long process.

Governmental Statements on Crypto in France

France has officially adopted a crypto-friendly stance through governmental statements, such as the Minister of Economy and Finances declaring that he wants France to be “the European powerhouse of crypto and DeFi”.

The governmental communication has been commented by the ADAN, a French association of cryptocurrency companies, as not always being in line with the evolution of the regulation. One may say that the French regulators are hesitant between offering an enabling framework and enforcing strong compliance and costs to the crypto companies.

A popular French saying goes “If it moves, tax it. If it still moves, regulate it. If it stops moving, subsidize it.”. We may say that in 2024, the situation is going from “regulate it” to “subsidize it”, with a level of requirements now in line with MiCA on one side, and a will to beat other European countries on this market on the other side.

Requirements to form a crypto licensed company in France

The regulator in France for crypto activities has set requirements, some of which are specific and some others that rely on business common sense. That is to say that depending on the intended activity and the company, some requirements will be assessed on a per case basis, such as the minimum share capital for example.

To obtain a crypto license in France, a crypto project must have a company registered in the European Union or the European Economic Area. It is not mandatory to form a French company in order to obtain the DASP license. If the application is carried out for a French company, then France should be the actual place of business of the project.

AML-CFT policies and procedures, as well as KYC processes and systems, must be compliant with the requirements set in the Monetary and Financial Law and the General Regulations of the AMF. The regulator expects to see a contract or a draft agreement with a KYC software provider (or a MVP if the software is developed in-house). The reporting features of the software will be assessed as well.

The company shall have at least one AML officer. This individual does not need to be French or reside in France, but must be familiar with French law.

An emphasis is made on the risk assessment and management. Every risk should be detailed in the company’s documentation.

The business plan must be detailed in a consequent documentation, that also shows financial projections, cases of emergency and business continuation plans, solvability, company workforce and other relevant information.

The founding team should demonstrate “honor and competence”. In concrete terms, this means providing a resume, filling a detailed form provided by the AMF and providing a certificate of non criminal record for all shareholders, directors and managers of the company.

There is no minimum share capital requirement. However, in case of custodial activities, the AMF expects the applicant to declare a consequential share capital for solvability. As an alternative, the crypto project can register with an insurance policy that shall be compliant with the AMF General Regulations.

Security of the systems and of the clients’ assets should also be maximized. The AMF requires applicants to stress test their security features by appointing a certified cybersecurity expert in France for an assessment.

The process of setting up a company for a cryptocurrency business in France

Company formation in France was made simple in the late 2010s. The minimum share capital has been brought down to 1 EUR and limited companies with simplified ownership have become popular.

To form a French company, one simply needs to gather notarized ID documents (passport, proof of residence & certificate of non criminal record). The incorporation process in France only takes 1 to 2 weeks and can be performed remotely.

A company formed in France that is willing to apply for the crypto license in France should have substance in France: an actual office space (can be a shared open space) and having part of the team working in France on a regular basis.

Taxation of cryptocurrency companies in France

France has set a simple framework for the taxation of cryptocurrency activities.

• Trading proceeds are taxed the exact same way as any financial instrument, with a 30% flat rate on the plus value.
• Mining activities are qualified as “non commercial profit” and subject to corporate income tax.
• Other crypto activities are subject to corporate income tax on their profits.

The corporate income tax in France is 25% of the profits. The first 30,000 EUR of income are taxed at a lowered 15% tax rate.

Obligations of crypto companies in France

To maintain its French crypto license once the application is successful, a crypto project should acknowledge and enforce at all times the obligations laid out by the law and the regulator’s guidelines.

Most of the obligations are related to compliance with AML-CFT and KYC duties, and with ensuring the safety of customers’ data and assets. This means maintaining communication with the AMF at all times and reporting any suspicious customer and transaction, but also every attempt to breach into the systems of the company.

In the same logic, the crypto companies in France must ensure at all times that they have human and technical resources adapted to their activity and the services they provide. Its personnel should have been educated on the compliance and security aspects and receive yearly training on the matter.

It employs a compliance officer at all times (can be one of the directors) and should always have 2 directors in its board as a minimum.

Sanctions for violating France’s crypto-business obligations

France distinguishes violations to the crypto business obligations and financial crime.

For breaching the regulation, the AMF can decide to revoke the license from the company. This license retrieval can be temporary or definitive, depending on the cases.

In case of issuing incorrect or misleading information, a company that is licensed or in the process of getting licensed can get its license revoked. The AMF will also publish a public statement on the wrongdoers, exposing their faulty communication and the facts related to it.

Committing financial crime in France is heavily sanctioned. The different crimes and their consequences on the wrongdoers are then relevant to the Penal Code and to the French court, which may imprison and fine heavily the criminal individuals.

France also regulates advertisement pertaining to financial services, including crypto. Only a company licensed by the AMF is allowed to advertise in France.

In a recent development, France also created a framework for influencers. Since September 2023, finance influencers are required to undergo a financial course in order to obtain a certificate. Crypto companies should then check that the influencers they work with in France have this certificate.