France steps in where sceptics fear to tread
• President Emmanuel Macron’s embrace of the crypto sector could see the rise of a ‘start-up nation’
At a crypto conference in Paris in late March, the buzz stood in sharp contrast to the nearby mounds of rubbish that gave the impression of a breakdown in city services.
As protests and strikes against President Emmanuel Macron’s plan to raise the retirement age roiled the French capital, digital-asset executives rubbed shoulders at a convention space inside the Louvre Palace. Attendees sipped champagne at an evening gathering in the museum section and then were treated to a private viewing of the Mona Lisa and other masterpieces.
The mood was equally at odds with the woes — most of them self-inflicted — that have befallen the industry over the past year.
Proponents like to describe crypto as a truly global phenomenon, linked by blockchains unencumbered by antiquated legacy systems that vary by nation. Yet its world has become markedly smaller over the past two years, with China banning most digital assets, Singapore, and Dubai tightening rules, and US authorities cracking down after FTX’s messy implosion in November.
Against that backdrop, Macron’s embrace of the sector has prompted companies from Circle Internet Financial to Crypto.com and Binance to make Paris their European base. While France is still a small player in crypto and is working to tighten regulation, its share of venture capital dealmaking jumped in the first quarter in an early sign that Macron’s efforts to attract digital-asset business are starting to bear fruit.
“They want to be a start-up nation and I think it’s legit,” Joe Lubin, CEO of New York-based blockchain technology company ConsenSys, said in an interview at the Paris crypto event, which organisers estimated drew about 8,500 attendees, more than the year before. “They do like people in our ecosystem.”
It’s not as if France is idly standing by as other countries clamp down. After FTX’s collapse, senior officials including centrist senator Hervé Maurey and Banque de France governor François Villeroy called for stricter regulations.
Earlier this year, parliament approved rules requiring more disclosure in areas such as pricing policies and conflicts of interest, as well as segregation of customers’ deposits — an intermediary step before EU-wide regulation takes effect.
Other hurdles abound for a sector that pitches itself as a bastion against government overreach, not least France ’ s notoriously rigid labour system. And there’s always the risk of a political backlash should crypto get embroiled in more high-profile scandals. Just days after the Paris event wrapped up, the US Commodity Futures Trading Commission sued Binance, the dominant digital-token exchange. The CTFC also sued Binance’s billionaire CEO Changpeng “CZ” Zhao, who tweeted a selfie with Macron last July.
“The government is in a complicated situation,” said FrançoisJoseph Schichan, director at consultancy Flint Global and a former French diplomat. “France is going to come under pressure, from the EU and maybe the US, to harden its regulation.”
Still, France’s response has been far more collaborative than the US one. When opening a comment period on proposals to regulate crypto assets in February, the banking regulator said the move should be seen as a “positive signal” for decentralised finance.
Executives gathered in Paris seemed eager to keep it that way. “Very savvy” is how Lubin described officials and regulators. “Very present at all the crypto events,” said Marguerite de Tavernost, a venture capital investor at the Ledger Cathay Fund, about digital minister Jean-Noel Barrot. Tom Duff Gordon, vice-president of international policy at exchange Coinbase Global, commended policymakers and regulators for taking a “proactive role” in developing a crypto ecosystem.
San Fransisco-based Coinbase is under pressure from authorities at home, announcing on March 22 that the Securities and Exchange Commission has said it plans to bring enforcement action against it.
The company is assessing where to base its main EU entity, as the bloc readies its sweeping first set of crypto rules in the Markets in Crypto Assets directive (MiCA), Gordon said. He described France as an “attractive” option, while saying the process is continuing.
Binance has added more than 150 permanent positions in France in less than a year and is still expanding there, David Princay, president of the local unit, said in an email.
Macron’s decision to stay the course even as a series of scandals roiled crypto may be partly rooted in broader strategic considerations. Like much of Europe, France watched as US companies such as Meta Platforms’ Facebook and Twitter dominated what is often referred to as the second version of the internet, one defined by the advent of social media.
Now, according to crypto advocates, the world is entering the era of so-called web3 — often described as a more decentralised iteration of the internet built around blockchain technology.
Shortly before being reelected in 2022, Macron described web3 as “an opportunity not to be missed,” adding that “France and Europe should be leaders of the future generations of the web”. Even before that, he had pushed through policies benefiting the sector,
‘PARIS’S CRYPTO ECOSYSTEM HAS ACCELERATED, MAYBE BECAUSE IT IS MORE COMPLICATED TO DO CRYPTO IN OTHER COUNTRIES’
such as cutting taxes on crypto profits and a new “lighter touch” registration regime.
“The efforts and policies that have been implemented over the past few years since Macron was elected are paying off,” Barrot said in an interview in late March. “Efforts to make France a most attractive place for the development of web3 and blockchain-based technologies, including crypto assets.”
France has other attributes that appeal to crypto executives. An important one is its topnotch engineering schools such as École Polytechnique that churn out a steady supply of tech talent. Beyond that, Paris has attracted much of the financial services sector that left London after Brexit, deepening the ecosystem surrounding digital assets. Some of its famed luxury-goods brands, from Louis Vuitton to Cartier, are developing blockchain-based technology to certify their products’ authenticity or track after-sales services.
“It may be just a feeling, but in the past six months it seems like Paris’s crypto ecosystem has accelerated a bit,” said Paul Frambot, CEO of French startup Morpho Labs, the developer of an eponymous blockchain protocol.
“Maybe because it is getting a bit more complicated to do blockchain and crypto in other countries.”