France’s authorities prepared to surpass the EU by tightening regulations on DeFi and cryptocurrencies

France’s leading financial regulators are hinting at a significant shift in how cryptocurrency and decentralized finance (DeFi) are governed, with both the Autorité des Marchés Financiers (AMF) and the Banque de France (ACPR) proposing tighter controls than those outlined by the EU’s Markets in Crypto-Assets (MiCA) rules. Expected to take effect by the end of 2025, these new standards are designed to mitigate liquidity challenges, bolster investor safeguards, and respond to the evolving landscape of DeFi.

The suggested regulations would require crypto asset service providers to hold substantially higher capital reserves, surpassing the 1.5% minimum required by MiCA. Furthermore, companies delivering decentralized services must register with the AMF, regardless of whether they have a central governing body. This represents a stricter stance compared to the EU’s more flexible direction as MiCA nears completion.

Additionally, the AMF and ACPR plan to subject stablecoins to tougher evaluation, particularly concerning how they are backed and redeemed. Regulators have voiced worries that opaque reserve practices among certain stablecoins could introduce systemic threats to the wider financial network. Consequently, stablecoins active in France may be compelled to adhere to detailed liquidity and auditing standards.

DeFi platforms, commonly operating without centralized oversight, are also being closely examined. The AMF has suggested launching a fresh licensing system for organizations offering automated services through smart contracts. This move would make it mandatory for DeFi participants to follow know-your-customer (KYC) and anti-money laundering (AML) protocols, aligning them with conventional finance regulations. Some in the industry caution that these requirements could stifle innovation and push DeFi operations to less regulated regions.

This regulatory push reflects a broader international movement toward tighter crypto oversight. While the EU remains focused on unifying rules via MiCA, France is charting a path toward more robust national regulation. According to the AMF and ACPR, swift developments in crypto demand a vigilant approach to safeguarding investors and ensuring financial security.

The industry response is mixed. Some players appreciate the greater regulatory certainty and protection for investors, while others worry about increased compliance costs, particularly for smaller enterprises. Legal specialists note that the legal framework is still evolving, with final regulations likely to be adjusted after considering industry feedback. The results will be pivotal for how French crypto and DeFi firms position themselves and compete on the global stage.