French finance minister Bruno Le Maire (pictured) has become the world’s most senior official to give a speech at a blockchain conference as France, and by extension the European Union, waves the crypto flag.
For French speakers, the speech is at the end of the article. We’ll have to wait for a translation. The minister however has given an extensive interview with a French business magazine. A rough translation in its entirety follows with cosmetic modifications.
What role does the government have for blockchain in its strategy?
Bruno Le Maire: The development of the blockchain ecosystem is a priority for the government: it is a technology that can potentially contribute to the modernization of our businesses and our economy.
That’s why the government has an ambitious blockchain strategy. We have all the assets to make France a top country in blockchain, we must value such assets.
A sign of the vitality of our ecosystem: we have identified more than 200 innovative blockchain projects developed in France.
What is the amount of capital allocated to this ambition?
Over the next five years, the state will invest 4.5 billion euros in breakthrough innovations, including blockchain technologies. It is an important commitment.
The goal is to take a technological lead for French and European tech companies to be able to compete against the Chinese and American technological giants.
Blockchain technologies are evolving very fast. To avoid wasting time, funding has already been proposed in the form of calls for projects.
We have therefore launched the “Innovation – Growth Competition” this spring, to support projects, particularly in the context of blockchain technology.
In addition to investments, what is the government’s roadmap?
With the recent adoption of the Pact Act, we have already taken important steps to promote the development of blockchain in our economy.
We have put in place an unprecedented and an attractive legal framework for token issuance and digital asset service providers in the Pact Act.
We also have a tax and accounting framework adapted to the specificities of crypto-assets.
We will begin a second phase of this strategy, aimed at facilitating the implementation of blockchain technology in all sectors of the economy.
The work carried out in recent months, with the entire ecosystem, has identified several new areas: deploy blockchain in French industrial sectors; fund innovative blockchain projects; assist projects that may have any questions, in particular in the legal and regulatory aspect.
All planned actions will be put in place by the end of the year to be at the forefront of technological, security and sovereignty issues.
How to explain the dramatic government turnaround on crypto-assets in early 2018?
There was no change. Our line has been constant since the beginning. To give blockchain technology a chance while reconciling innovation and protection, we must not hinder innovation because these new technologies are likely to provide new services tomorrow, more efficient services and more adapted to consumers.
But we must not be naive about the risks associated with the use of this complex technology and crypto-assets (so-called “cryptocurrencies”), particularly with regard to money laundering or the financing of illegal activities.
Since the beginning, our goal is to build a legal framework of trust so that our companies can innovate while protecting the consumer. But I believe that after the episode of high volatility of crypto-assets in early 2018, everyone has become aware of the importance, but also of the volatility of these new instruments.
That is why, together with my German counterpart Olaf Scholz, I approached the G20 finance ministers on this subject.
It was also at this time that I chose to entrust Jean-Pierre Landau with the task of drawing up a complete overview of the major issues posed by crypto-assets, whose conclusions inspired our action at a national and international level.
France already has some nice start-ups in the sector. Which ones caught your eye?
France has some nuggets in the entire value chain, from new service companies, to hardware and protocols.
I am thinking in particular of Tezos, which allows the development of a blockchain protocol overcoming the known defects of public blockchains.
I am thinking of Liquidshare, which seeks to improve SMEs access to capital markets.
I am also thinking of Iznes for the distribution of fund shares via blockchain or of course Ledger, which has everything to quickly become our first French unicorn blockchain company.
There are many more. France has many talented entrepreneurs active in this sector with promising projects. I am confident of our ability to establish ourselves as a center of excellence at the global level.
After a task that lasted more than a year, France now has a regulatory framework for crypto-assets. What is your assessment?
Thanks to the Pact Act, which was passed in final reading last week, France has created an innovative legal framework for token issuers.
They may apply for a license or an approval from the Autorité des Marchés Financiers. This license and this approval will be optional. The AMF will constitute a “white list” of projects and intermediaries that have received this approval.
This regulatory framework was completed at the end of last year with added measures relating to the accounting and tax treatment of crypto-assets.
All of these measures form a coherent and a wholistic framework unparalleled in the entire world, leaving a great deal of flexibility to professionals and users while enhancing trust and transparency.
We are pioneers. This will allow us to develop a robust ecosystem, serious projects, new products.
One of the main aim of the AMF license is to make France attractive for blockchain projects wishing to raise funds via crypto-assets. Is this device not already anachronistic since the number of ICOs has decreased significantly?
The decline in the number of ICOs was predictable and necessary for the cleansing of the market. It does not detract from the potential and the benefits offered by this new funding method.
Second, this decline does not mean that our savers are less exposed to the different risks borne by ICOs. The system put in place will ensure that French savers have a level of protection against fraud and misinformation, without any equivalent in the world. It will be much more protective than the current legal void in which they evolve.
The Caisse des dépôts had been designated in first reading of the Pact Act as a last resort to open accounts for entrepreneurs to whom traditional banks refused access. Who will do it eventually?
Access to bank accounts is decisive for the success of the crypto-asset management framework provided for in the Pact insofar as these players, many of whom are innovative start-ups, face real difficulties with commercial banks.
The solution considered at first reading in the National Assembly was not completely satisfactory. It created an entirely new task for the Caisse des Dépôts et Consignations, which it was not equipped to deal with as it did not have any retail banking activity.
This provision has therefore been removed from the text of the law, in favor of a principle of facilitating access to bank accounts for entities that have received approval or ICOs that have been green-lighted by AMF.
The taxation of crypto-assets has been reduced to 30% for capital gains, but in Germany, for example, capital gains are exempt after one year of holding. Can France really compete?
Taxation is not the only factor on whether a country is attractive for crypto-assets. Regulation is important and, even in the area of taxation, the clarity of the legal framework can be as important as the level of taxation.
It was a strong expectation of industry players and we responded. I further specify that in the Finance Act for 2019, we have simplified and reduced the taxation applicable to the sale of crypto-assets for retail investors: we have eliminated the principle of a monthly declaration in favor of an annual declaration, lowered the capital gains tax rate from 36.2% to 30% and provided for an exemption from crypto-crypto transactions.
The purchase-resale of crypto-assets carried out in a professional capacity is taxed under common law conditions.
Should we expect some relief if France wants to become a “crypto-nation”?
One of the major innovations of the system put in place in 2019 is the total tax exemption during exchange transactions between crypto-assets.
This is a real element of attractiveness that makes France a unique country for investing in crypto-assets.
The relaxation of the methods for calculating realized capital gains is also important. The new rules exempt investors from determining a capital gain for each transfer of crypto-asset units, as would be the case for traditional securities. Lastly, this new regime significantly eases investors’ declarative obligations.
Why did you refuse the amendments that proposed to clarify the tax system, in particular to distinguish the capital gains that depend on an occasional activity from those of a usual activity?
It is not necessary to come back to the notion of “usual exercise” of the activity of purchase and resale of crypto-assets: this notion applies fully to the activity of purchase-resale of crypto-assets, without any need to specify it. The conditions of its application may be specified by the doctrine if necessary.
Do you dissociate crypto-assets from blockchain technology?
These two concepts have been linked since their inception. Crypto-assets usually rely on a blockchain infrastructure, but the blockchain goes well beyond crypto-currencies.
It is not limited to the financial sector: it is intended to develop throughout the industry. Any registry involving secure pooling of data can rely on the blockchain to gain efficiency, speed and security of execution. This is the aim of our blockchain strategy, to develop these new uses.
What is your opinion on Bitcoin?
There is first a pitfall to avoid: do not limit the blockchain to Bitcoin. Bitcoin obviously embodies the promises, the fantasies, but also the uncertainties of the blockchain. It’s the only financial asset that has seen its share price rise so steep in just a few months, before losing more than half of its value last year in barely a month.
This demonstrates the extreme volatility and uncertainties of this product. We must therefore invest carefully in these assets and give investors all the information needed to make the right decisions. This is the line we have defended in Pact: more freedom, more transparency and more protection for investors.
Were you surprised when you noticed that many Venezuelans had acquired it to protect themselves from the country’s hyperinflation?
The Venezuelan situation is very peculiar. Inflation reached 1,370,000% in 2018 and is expected to reach 10,000,000% in 2019. Venezuelans see Bitcoin as a safe haven.
Despite its volatility, it remains more stable than the bolivar. It is also more accessible than foreign currencies.
This explains why the volume of bitcoin trade in Venezuela has increased tenfold in one year. This phenomenon also testifies to the credibility acquired by certain cryptos among savers.
The blockchain carries with it the gene of digital decentralization. Is this, in your opinion, a way to fight the centralizing Google, Amazon, Facebook, and Apple (GAFA)?
The transition to a decentralized system enabled by the blockchain is a major development that will move the lines.
The GAFA have already started to invest in the blockchain. This is why France is strongly positioned on the subject.
Is the fact that Facebook is about to launch its cryptocurrency dangerous for state sovereignty?
The blockchain does not belong to anybody: it is healthy that all actors can understand this technology.
Nevertheless, we will be careful that the uses of the blockchain are fully compatible with our standards of security, protection of individual rights and the exercise of our sovereignty.
MP Pierre Person emphasized the benefits of a state cryptocurrency, in particular because it would establish a direct link between the central bank and citizens. Are you in favor of a crypto-euro?
This subject is a matter of debate between academics, observers and central bankers.
In practice, such a project is not mature in the short term: the euro area benefits from a vast range of means of payment, including digital.
The creation of a public cryptocurrency also raises many legal and technical issues that are not resolved.
The MP Jean-Michel Mis believes that our surplus energy could, during low power consumption, be used to the advantage of French crypto miners. What do you think ?
The crypto mining business uses energy to secure transactions. To maintain the same level of security by reducing power consumption, protocols must evolve towards more efficient solutions.
I wish to reflect on the economic and environmental performance of the blockchain. It will also address other major themes to ensure the sustainability and acceptability of blockchain technologies: improving consensus methods, governance and sovereignty, but also the interoperability and accessibility of applications.
For French speakers, the Minister has opened the Paris Blockchain Week conference. What little French we understand seems to suggest it is the most powerful speech given by any official on blockchain technology so far.
France is going crypto with all its might, making this potentially a turning point for the crypto space and for Europe.