France is doing everything possible to be in the center of the world crypto news: the Parliament has been actively amending the legislation over the past months; and now the regulators have suddenly reminded private investors about the high risks that are carried with cryptocurrencies. This is one the possible interpretations of the joint letter on the dangers of speculative virtual financial products from the regulators of the stock market - Autorite des Marches Financiers (AMF), the Central Bank of France (Banque de France) and French Prudential Supervisory Authority (ACPR).
"We remind of the risks associated with investing in speculative crypto assets that are not very well adapted to the profiles of inexperienced private investors," - the warning contains - "Buying, selling, and investing in bitcoins are currently carried out outside of any regulated market." State authorities doubt the legitimacy of cryptocurrencies even after the Finance Committee of the lower house of Parliament considered and adopted amendments to the General Tax Code CGI (Code General des Impots) in July this year, which significantly simplify the turnover of digital assets. Moreover, the Central Bank received serious power tools to register and control the ICO. So what has happened to make regulators bothered?
Not so long ago the legal system of the Fifth Republic has rapidly adapted to the peculiarities of the new economy, so why did such suspiciousness, which is much more typical of the crypto skeptical countries, appeared?
The reaction of the authorities followed the statement of the French Tobacco Federation (Fédération des Buraliste) that it allegedly received permission to sell bitcoins in tobacco shops. As previously reported in a press release of the organization, it managed to come to an agreement with a local digital company on the sale of paper (!) €50, €100 and €250 bitcoin vouchers (which is $56.5, $113 and $282.5 respectively). According to the future plans of the businessmen, these vouchers could be exchanged for real digital coins in one of the crypto firm departments. Of course, this project could be treated with a fair amount of humor, as one of the amusements of the young crypto market, if not the three points to be kept in mind.
Firstly, the French Tobacco Federation has more than 4,000 outlets across the country, so this is a solid market. For comparison: "Auchan" retail chain in France contains only of 2964 sale points. How many “crypto vouchers” could be sold through these tobacco shops is hard to imagine, and no analyst would venture to predict it.
Second circumstance is the decline in the digital assets value. The crypto market is going through a really tough time, so the appearance of incomprehensible digital securities on it is unlikely to improve its position. Given the potentially large volume of sales, such cash surrogates if appearing on the free market, could further trigger the new bitcoin crash.
And third: financial regulators emphasize that the company contacted by the tobacco Association does not have any permission to trade securities from any of the local or foreign government financial institutions. Moreover, the capital of the crypto company is less than €50 000 ($56 500), and it could not guarantee the rights of customers and cover their risks. And while attracting a promising partner, illegal crypto firm only took advantage of the coincidence of the brand name with other financial companies that have the appropriate licenses.
Two significant conclusions can be drawn from this story.
As you know, the digital market appeared as a response to the financial crisis of 2008, which was triggered by the fraudulent actions of large financial companies. After that, the society reacts sensitively to any impure schemes on the monetary field and votes, of course, loudly votes with its feet. Today, the situation can be repeated in many ways: analysts are confused with the complex of reasons that caused a sharp decline in the cryptocurrencies value; but one of such reasons is undoubted — the negative impact of a huge number of scams, cyber attacks and fraud in the crypto market. So there is only trust of consumers and nothing else behind the value of digital coins and with its loss their value will fall in the wake.
The role of financial regulators is interesting and unusual in this story. People who have some relation to the new economy are used to the fact that state structures don’t help the development of digital financial technologies - at best. And it doesn’t matter - whether the political reasons or the protection of the traditional business interests are the main motivation. But not in this case. The French monetary authorities fulfilled their direct function - they warned nationals and saved them from the fraud risks. This is a very significant and positive example of the institutionalization of crypto economy. Perhaps such a practical example of legal regulation will serve as a lesson for crypto business and a good illustration of how the government can be integrated into the new financial reality.