The first deputy governor of the Banque de France reacts to the text of the European Commission which aims to regulate crypto-assets and discusses the challenges of a digital euro.

JDN. The European Commission published last September the MiCA text, which proposes to establish a specific regime for crypto-assets. What does it inspire you?

Denis Beau, Senior Deputy Governor of the Banque de France. © Bank of France

Denis Beau. This draft regulation is welcome because it responds to a need for supervision and harmonization of the regulatory framework for crypto-assets at European level. From 2013, the Banque de France and the ACPR (Prudential control and resolution authority, editor’s note) highlighted the technological contributions on which crypto-assets are based but also the risks associated with their application, particularly in the field of payment. And therefore the need to supervise them well. A framework has already been set in France with the Pact law. The establishment of common rules, a passport system and strict surveillance contained in this text therefore appear to me to be appropriate. I had underlined the interest of being inspired and relying on the French system at European level. Which is the case with this text.

Regarding stablecoins, a type of crypto-asset, shouldn’t we, as you said during our last exchange, build on existing national or regional frameworks by adapting them rather than creating an ad hoc framework?

I have not changed my mind. It is an asset to rely on regulations and experiments that have already been tested to better regulate stablecoins. The Commission’s proposal is part of this approach because it is inspired by the regime for issuing electronic money, which seems appropriate to me. This draft text nevertheless and precisely adapts this regime to the specificities of stablecoins.

Wouldn’t this framework be too restrictive for players in the blockchain and crypto-assets sector, which are often small players? The text is 168 pages …

“The first experiments with central bank digital money will be completed at the end of this year”

The Commission’s proposal will be the subject of negotiations which will take into account market reactions. The proportionality concern is already present in the text because this project contains exemptions for structures that start with low activity. The text will facilitate their development within the European Union, by promoting good risk control. This framework should help create public confidence, promote the development of fintech and start-ups in the field of crypto-assets.

Have you identified, as the actors of the French ecosystem have done, obstacles, points of friction or improvements to be made to this text?

Today, it is still too early to give a complete diagnosis of a draft text which will be the subject of negotiations. From the point of view of the Banque de France and the ACPR, this project seems to be going in the right direction. We are of course listening to the ecosystem of crypto-assets, through the Fintech forum (annual event organized by the ACPR and the” Financial Markets Authority, editor’s note) and its think tanks. We will therefore be attentive to their views on the methods of implementing the principles of proportionality and neutrality vis-à-vis business models.

This ad hoc framework is scheduled for 2024. Isn’t it a bit late as the United States is making great strides on these subjects?

This is the European calendar. It is very important that the development of stablecoins in particular, with its massive network effects, is based on a well-established framework, adapted and allows good risk control from the start, for development in good conditions.

Where are the central bank digital money (MDBC) experiments selected by the Banque de France last July?

“The Eurosystem must be ready to issue a digital euro to the general public if necessary”

Since December 2019, the Banque de France has been carrying out experiments with industry players to test methods for making the change central bank in digital form. We selected eight files out of about fifty received. The first experiments, which are in progress, will be completed at the end of this year.

These experiments concern interbank exchanges. What about a central bank digital currency intended for the general public? Clearly, a digital euro.

We have to put things in context. The BCE and the national central banks, which make up the Eurosystem, must stand ready to issue a euro digital for the general public if it is necessary to guarantee the freedom of choice between the means of payment but also to preserve monetary sovereignty in the face of the development of big tech in the field of payments. This issue should help to complement and not replace existing payment solutions. The digital euro should exist alongside cash. The impacts linked to the issuance of a digital euro must be precisely measured, in particular on the banking system and financial stability.

It is in this context that the ECB published a report on the digital euro which sets the stages, the first of which is a public consultation until January 2021 on the interest and use of a retail MBDC. The second step will consist of carrying out experiments to test the different emission models. The Banque de France, the ECB and the national central banks will participate, with a result by mid-2021. Following these two steps, a decision will be made on whether or not to launch a digital euro.

In his speech at the ACPR-AMF FinTech Forum on October 12, the Governor of the Banque de France, François Villeroy de Galhau, declared that “if necessary, the Eurosystem could decide to issue a retail MDBC”. What does “if necessary” mean?

There is an urgent need to carry out in-depth analyzes of opportunity and impact. We can see that in the payments sector, important developments are underway. Among the evolutionary factors, there is the development of crypto-assets as a settlement asset and the projects carried by a variety of players including big tech. There is also a shift in consumer behavior towards the benefit of electronic means of payment. But before making a deployment decision, it is first necessary to properly analyze and test solutions that make it possible to complete a range of means of payment today mainly carried by private players, in particular the banking sector.

Would this digital euro be issued by commercial banks? Can we imagine a public-private partnership?

This is a hypothesis that could certainly be implemented.