Our 2021 actions and 2022 good resolutions
In this new year, while sending its best wishes to the digital assets industry, Adan has prepared its 2021 retrospective and identified the actions planned for 2022.
2021 in France
Influence of the crypto-asset industry in France
In 2021, Adan continued to be the voice of the digital asset industry to policy makers, legislators, institutional act and other traditional industries. Our interactions have intensified and multiplied, our missions have expanded, and the number of companies that Adan represents has grown considerably: 100 members on 31 December 2021, compared to 54 a year earlier. Adan’s first annual activity report, published in July 2021, reports on the actions that the Association has undertaken since its creation to promote the growth of the sector.
The industry’s voice needs to be raised and its visibility increased. To this end, Adan has published a survey report on the state of the digital assets industry in 2020. It shows the present and future potential of the sector, while highlighting the levers that still need to be activated to catalyse its development. To deepen and complete this assessment, the Association has been conducting a new study since September, the conclusions of which will be published in February 2022. Adan also organised the first Crypto Finance Forum (CFF) on 19 July 2021 at the Maison de la Mutualité in conjunction with the EthCC. This event allowed to address and decipher the main topics of the crypto universe during a whole day, and to establish a constructive debate between crypto sector players, companies and startups, policy makers and authorities. On 18 July 2022, Adan will organise the second edition of the CFF.
2022 will be a crucial year for the crypto-asset industry, in an unprecedented context mixing the French presidential election campaign and the French presidency of the Council of the European Union. This agenda, which Adan has been preparing for several months, is a rare opportunity to put crypto-assets at the heart of the long-term priorities of our decision-makers.
PSAN regime: digital asset service providers
Promulgated in 2019, the PSAN regime – tightened up for the first time in December 2020 – was further strengthened in 2021 by Decree 2021-387 of 2 April 2021. At the same time, more and more players have registered as digital asset service providers with the Autorité des marchés financiers (AMF): 28 are now on the AMF’s white list.
The first pillar of Adan’s action towards PSANs is to support and inform the players in order to help them understand and comply with French law. The Association has published a methodological guide for them, and has enabled useful interactions with Tracfin (in particular for the updating of its online suspicious transaction reporting system “ERMES”), the ACPR (to publish its annual AML/CFT questionnaire) and the AMF (for example, in the context of its discussions on staking or NFTs, and the application or non-application of the PSAN regime).
Also, participating in the current work on the framework for DASPs On the one hand, the debates on the draft MiCA regulation are laborious and the trialogue is still pending. On the other hand, in terms of AML/CFT, both the European Commission and the FATF have set out their “ambitions” for DASPs.
Finally, defending the credibility of the French regime and the conditions for fair competition between DASPs was a key focus of Adan’s missions in 2021.
In 2022, Adan will continue to find the levers for the development of DASPs (preparing for European approval, finding insurance solutions, applying the right of access to bank accounts, limiting unfair and illegal competition, etc.) in order to bring about the emergence of the champions of tomorrow.
Relations with traditional industry
In 2021, Adan continued to work for access to bank accounts for companies in the sector, and in particular for the application of the right associated with the registration of digital asset service providers, enshrined in the Pacte law. Back in 2020, the crypto-asset industry and the banking industry had been brought together by the French authorities (within the framework of the ACPR-AMF Fintech Forum) in a working group to find solutions to this blockage. The group’s conclusions published on 25 March 2021, although the banks disassociated themselves from them, provide answers and recommendations for both sectors. In 2022, Adan will continue its efforts to (re)establish dialogue between the established players and the digital asset industry.
Accounting & Taxation of Digital Assets
Throughout 2021, Adan has been preparing the ground for the 2022 Finance law (PLF) by working on proposals to improve the taxation of digital assets and bringing them to Parliament. The last quarter was particularly intense for the Association and its Accounting-Taxation Working Group in order to promote its amendments. In the end, 3 of Adan’s 9 proposals were adopted. The year 2022 will aim to take up, improve and complete these recommendations for the next PLF, while carrying out useful work on these subjects in parallel, notably with the Accounting Standards Authority (Autorité des normes comptables or ANC).
2021 in Europe
MiCA: The regulation of crypto-asset markets
In 2021, Adan defended the industry’s position on the draft European Market in Crypto-Assets (MiCA) regulation. While Adan welcomes the unprecedented approach adopted by the European Commission, we drew the attention of the European institutions to the lack of proportionality of certain provisions – deleterious to new entrants – and the risks of considerably hampering the emergence of the most innovative decentralised use cases (decentralised finance – DeFi). At the end of the year, while the Council of the European Union succeeded in establishing its compromise on the European Commission’s proposal, the debates in the European Parliament – always difficult – did not lead to such a text. Thus, the launch of the trialogue remains suspended: Adan hopes that it will start at least under the French Presidency of the EU Council.
Security tokens and the pilot scheme: adjusting financial regulation
Another aspect of the European regulation under construction, Adan has campaigned for the establishment of a pilot regime for market infrastructures known as “DLT” which is accessible to new entrants – whose potential for innovation is fundamental -, which is more flexible, and which guarantees technological neutrality by excluding neither the use of public networks nor that of stablecoins.
At the end of 2021, the political agreement reached between the Presidency of the Council of the European Union and the negotiators of the European Parliament was approved by the ambassadors to the EU. The pilot scheme will soon be formally adopted by the Council and the Parliament and should enter into force in the second half of 2022.
In parallel with the debates on the introduction of exemptions to the current financial regulations in the context of the pilot regime for security tokens markets, Adan participated in the various European reform projects on the texts that make up the current framework. Adan responded to the European Commission’s consultations on the revision of the CSDR, and then on the revision of the Finality Directive. Adan confirms the need for regulatory adaptations in order to promote the development of new security tokens markets, and proposes an alternative methodology based on the purposes aimed at rationalising and optimising the existing regulation. The Association considers that the review of these texts should be carried out in connection with the introduction of the pilot regime, which will be completed in 2022.
Stablecoins and Central Bank Digital Currency (CBDC): which digital euro?
In 2021, stablecoins were again a major topic of debate and news. A comprehensive and complex subject, Adan organised a dedicated conference on 23 April 2021, bringing together a large number of experts and Mr Person to present the interest and challenges relating to their development, as well as their interaction with legal tender currencies. On the regulatory front, within the framework of MiCA, Adan worked throughout the year to rectify the draft framework applicable to issuers of stablecoins (asset referenced tokens and electronic money tokens), which the debates continue to make more complex and cumbersome.
With regard to the digital euro, the year 2021 saw the acceleration of the European Central Bank’s (ECB) reflections, culminating in the launch of its investigations in the last quarter. Adan assisted the ECB in its work through its response to the Bank’s public consultation on the characteristics of the digital euro, then its hearing by the monetary authority, and finally its alert on the need to issue a digital euro that is complementary to and interoperable with private initiative stablecoins.
2021 at the crossroads
Anti-money laundering and combating the financing of terrorism (AML/CFT): harmonisation under way
In 2021, Adan contributed to many advances in AML/CFT.
At the domestic level, Adan is pleased that 2021 has seen an increase in the number of service providers (targeting French clients) that comply with AML/CFT requirements: 28 companies are now on the AMF white list. Once again this year, the Association has supported the structuring of the PSAN profession: we regularly inform the players of regulatory changes, for example when Decree No. 2021-387 of 2 April 2021 is published, provide them with useful tools for compliance (such as our methodological guide), and work with Tracfin
At the European level, in March 2021, Adan contributed to the review of the European Commission’s report analysing the BC-FT risks affecting the internal market and related to cross-border activities. Furthermore, Adan responded to the European Commission’s public consultation on the AML/CFT legislative package published on 20 July 2021.
2022 should see the work on the European AML/CFT reform continue, and thus mobilise Adan. This is all the more true as the reflections of the Financial Action Task Force (FATF) last year are likely to have an impact on the debates. Indeed, in 2021, Adan has twice taken a position on the update of the FATF guidelines, first in March in the context of a response to a public consultation, then in December in the context of a position paper. Adan is concerned that the proposals are ill-suited to the digital asset markets and may even render certain innovations (including DeFi) meaningless. Work begun in 2021, Adan will continue its reflections in 2022 in order to propose the contours of a new regulatory paradigm adapted to decentralised applications.
Decentralised finance: the challenges of the future of France…
While decentralised finance (DeFi) was already attracting attention in 2020, its spectacular rise in 2021 has continued to attract the attention of new users and regulators alike. The subject first mobilised Adan from an educational angle. The Association organised a dedicated conference to explore this new decentralised, programmable and composable ecosystem, to understand its applications and the challenges that this sector presents for Europe. We also offered written documentation to popularise the main use cases offered by decentralised finance, and to decipher most of the non-financial risks weighing on this sector.
But DeFi has also asked Adan to follow and participate in the authorities’ reflections. Indeed, both in the draft MiCA regulation and the AML/CFT framework proposed by the FATF, decentralised finance is putting the current regulatory paradigm to a severe test. In 2022, Adan wishes to propose recommendations for new regulatory modalities adapted to DeFi, allowing to protect its users while not hindering its incredible potential.
Knowledge and understanding of crypto-assets and the industry: a constant learning curve.
In 2021, an important part of the Association’s work is educational and aims at facilitating the understanding of digital assets and use cases among traditional stakeholders.
In December 2021, Adan launched its dedicated “Pedagogy” page on its website. This portal lists all the articles published by the Association in 2021 aiming to document the major issues related to crypto-assets and blockchain technologies and deconstruct the main prejudices.
The articles published by the association in 2021 are :
- Introduction to distributed systems ;
- Taxonomy of crypto-assets on blockchain ;
- The advent of decentralised finance (DeFi): which use cases?
- What are the non-financial risks associated with the development of DeFi?
- Non-fungible tokens (NFT): digital scarcity ;
- The AML/CFT in the face of crypto-asset activities: what risks for what regulation?
- Ecological impacts and challenges of blockchain technologies ;
- Blockchain protocols and their energy footprint ;
- Crypto-blockchain use cases to improve the energy transition;
- Key concept on transactional analysis ;
- Key concept on mixers ;
- Key concept on anonymous crypto-assets.
For crypto-asset players themselves, understanding the environment in which they must operate is not always easy. The Association has therefore created a new “Regulatory” portal to list all the resources (internal and external) useful to companies in the conduct of their business.
In 2022, the Association will redouble its educational efforts with new articles, a partnership with a large group of business schools, and the availability of the team to anyone interested in these subjects who would like to get information from us.