France is on the verge of imposing mandatory KYC rules for all crypto transactions, industry sources say

Quick Take

  • France is set to bring new, stringent measures for the crypto sector, The Block has learned.
  • The country’s finance ministry is preparing to not only harden know-your-customer (KYC) rules for crypto firms but also bring crypto-to-crypto exchanges under regulation, Simon Polrot, president of French crypto association ADAN, told The Block in an interview.
  • The main reason for the proposed stricter measures are the recent terrorist attacks on France, these sources told The Block.

France is set to implement stringent new measures for the country's cryptocurrency sector, The Block has learned.

The French Finance Ministry is preparing to not only harden know-your-customer (KYC) rules for crypto firms but also regulate crypto-to-crypto transactions, according to Simon Polrot, president of French crypto association ADAN.

Polrot told The Block in an interview that he had been informed by the ministry of the proposed measures because ADAN is "a trusted interlocutor" on crypto-related matters.

Overall, several ministries were involved in crypto discussions, said Polrot, including the Ministry of Internal Affairs and the Prime Minister's Cabinet.

Two additional sources — Nicolas Louvet, CEO of Coinhouse Group, and Pierre-Guy Bareges, CTO of Digital Service Group — confirmed to The Block about the proposed measures. Coinhouse provides crypto trading and custody services in France and is registered by the country's financial markets regulator, the AMF. Digital Service Group is the operator of French crypto exchange Zebitex, and it is currently undergoing a licensing process with the AMF.

Both Louvet and Bareges said in separate interviews that they were informed of the upcoming measures by the French government.

The Finance Ministry did not respond to The Block's request for comment by press time.

Why stricter rules?

The main reason for the proposed stricter measures are the recent terrorist attacks on France, these sources told The Block.

Two weeks before the attacks, i.e., in September, French police had arrested 29 people suspected of funding Islamist extremists in Syria using cryptocurrency.

"What happened is one of [the] wannabe digital assets services providers (DASP) (or PSAN in French) let some people using the services to send money abroad, especially in Turkey and Syria, and then faced investigation from security services," Bareges told The Block. "Then the police ran an operation arresting those people and said that bitcoin was used to finance terrorism, and then the finance minister declared we need to control crypto much better."

In October, France's Finance Minister Bruno Le Maire said on national television that the country would make proposals "to strengthen the control of financial funds" because "cryptocurrencies pose a real problem of terrorist financing."

Polrot characterized the moves as "political positioning."

"The government had to react and take a stance and to do something to explain that they are doing something to fight terrorism," he told The Block.

KYC measures

As for the first proposed measure, the Finance Ministry is set to publish a decree later this week — likely Wednesday or Thursday — which will mandate full KYC for all crypto transactions, including crypto-to-crypto transactions, Polrot, Louvet, and Bareges, all told The Block.

A decree is the rule of law in France, and does not go through any parliamentary approval processes.

The full KYC of all crypto transactions means all crypto exchanges and other firms will have to verify their customers, irrespective of transaction size.

In other words, all crypto transactions worth more than €0 will have to go through full KYC processes and require two forms of government identification (ID). The current limit for KYC checks is €1,000, and at present it applies on