Welcome to the second episode of the “Understanding Bitcoin” interviews from Bitstack, the program that deciphers the Bitcoin universe in simple, clear language, accessible to all.
Alexandre Roubaud, co-founder and CEO of Bitstack, was pleased to welcome William O'Rorke, associate lawyer at ORWL avocados, a consulting firm specializing in crypto and web3 projects on legal and regulatory topics.
In this episode:
➜ The regulatory evolution of bitcoin and crypto. ➜ The meaning and impact of the PSAN. ➜ MiCA: challenges and perspectives. ➜ The impact of the FTX case. ➜ Predictions about the future of regulation and bitcoin.
The introduction of the crypto regulatory framework with the PACTE law
To begin with, it should be understood that the legislator is only interested in topics that concern enough people. Before 2019, bitcoin and cryptocurrencies were too small to be a big enough subject to be translated into law.
At the time, I remember when I said “I'm interested in bitcoin”, people asked me what it was, and we got into an endless discussion.
The PACTE law came just after a period of euphoria that occurred in 2017 - 2018, a period during which there were in particular ICOs, a general public phenomenon. ICOs are token offerings. At that point, it became an important enough subject to be the subject of law.
And in the law, there is always an interesting phenomenon. You start working on a law for a reason, which you end up a bit forgetting, and in the end you end up with something else.
Well, that's exactly what happened.
At the beginning, the PACTE law was created for ICOs. And in the end, in fact, we realized that what was important was not so much the ICOs, it was rather these financial players who were a bit “exotic”. Those who said to themselves “Well we are going to do the same thing as traditional finance, but with cryptocurrencies”.
The question was: “how do we transpose the rules of traditional finance to this new finance”. And the PACTE law is a first step. Hence the creation of this “PSAN” status (digital asset service providers registered with the Autorité des Marches Financiers). PSANs today are the same thing as intermediaries in the financial world.
At the time, the regulator said to himself: “What is the minimum that can be asked of an actor who is going to sell Bitcoin in a brick and mortar store?” Note that in France and Europe, we are in countries with significant issues of money laundering, tax evasion and risk sensitivity. So that was the first step. Also, there was the subject of the honorability of competence. In other words, we will look at who are the people doing these activities, the people behind them. It's really the base of the base.
And that's the PSAN regime from 2019 to today. Actors who wanted to work in France had to meet these conditions.
What did the PSAN status bring to the ecosystem?
[The PACTE law established the status of digital asset service provider (PSAN) in France. This status covers the activities of custody of digital assets on behalf of third parties, the purchase/sale of digital assets for legal tender or against other digital assets, the operation of a digital asset trading platform, other digital asset services such as the reception and transmission of orders on behalf of third parties, the receipt and transmission of orders on behalf of third parties, portfolio management on behalf of third parties, advice, underwriting, guaranteed investments and unsecured investments.]
At the time, PSAN was a trauma because crypto is a sector that is not very pro-regulatory. Especially at the time. It is something that has diminished over time. But in fact, there was a change that was quite notable because before the PSAN, there was a very strong suspicion of illegality on all activities related to crypto.
There were a few actors who, before the PSAN, had their bank accounts systematically closed. The people who worked for these actors also had their bank accounts closed. They had a reputation for participating in money laundering schemes, financing terrorism... There were a lot of fantasies, obviously. But it must be understood that for the rest of the financial and banking industry, the fact of not being regulated and providing activities that are financial was something that was incomprehensible.
Do banks feel at risk when it comes to crypto players?
I have a lawyer's bias on this subject. I understand very well this anti-innovation discourse on the part of banks. And you have to be lucid, banks remain economic players who lobby and defend their interests. It should be understood that banks have huge regulatory obligations to implement. It's expensive, they do it with the resources at hand, they are huge, it's complicated to manage, they don't necessarily have a lot of performance and money to look for in crypto, so it's easier to close than to say to yourself “we're going to take a consulting firm over six months that will take us 80,000€ to try to detail whether we can bank this or that actor”.
The BNP balance sheet is bigger than the French GDP. So you have to put yourself at their scale. I'm not saying this to defend them because that doesn't prevent them from remaining behaviors and acts that I personally fight for on behalf of my clients, I go to court to seek damages, I use accounting mechanisms to force banks to force banks to keep bank accounts, so let's get along, let's get along, I'm on the crypto side, but on the other hand, the discourse of saying that it's a meeting of French bankers that's happening say “we're going to buy crypto”, I think that's actually not quite it. It's much easier than that.
The benefits of the PSAN status for consumers
If you want to have a relationship with crypto that is a report of average savers, going through a PSAN seems to me to be the basis because it is an actor that is supervised by a regulator, shareholders and managers are identified, and therefore identifiable in case of a problem, it is an actor with whom mediation is possible through the prism of the AMF, the Financial Market Authority. This is one of the major contributions of the PSAN.
For a consumer, the fight against money laundering or terrorism is not their problem. Their subject is: “Are they going to leave with my money? And if so, what do I do?” Before the PSAN regime, a lot of customers came to us saying “I invested in a company based in Seychelles and they no longer respond”. We can't do anything. Demands are being sent, but I'm not the FBI, I can't go by helicopter to Seychelles to get the money. So in fact, nothing could be done. With PSANs, you can intervene. You go to the AMF, it's free, it takes less than three months, and nine times out of ten, there is a solution that can be found with the PSAN buyer very quickly, free of charge, without going to court. And if that is not enough, you can go to court, and you are dealing with a company registered in France or in Europe, that is to say, it is in an area where there is judicial cooperation, so you have a remedy. And it is also an advantage for PSAN actors. It is an enormous security to say to yourself that you will be judged according to an existing regulatory framework and through a regulator who knows me, who knows my business. On both sides, we know the rules of the game.
For a PSAN actor, there is nothing worse than being judged, with all the respect I have for the judiciary, by a magistrate of a magistrate's court because you spend three-quarters of the audience explaining what bitcoin is, and in the end, there is a side where you sometimes have the impression that it's being played by dice. I'm caricaturizing, but you see. Personally, I prefer to deal with a financial regulator.
Introduction of MiCA and differences between registration and PSAN approval
MiCA is a European regulation that will govern PSANs everywhere in Europe. It is a territorial deepening. There will no longer be a specific regime in France, another in Poland, another in Poland, another in Germany, etc. From Porto to Tallinn, you will have the same rules for everyone. The French actor will be able to communicate and promote to customers in Estonia, and the Estonian service will be able to advertise in the Paris subway without having to ask for local authorizations. It is also a deepening in terms of protection for savers. PSAN registration is a minimum of protection. There, there will be much more comprehensive protection rules. We will require service providers to have what is called equity, that is to say, to have, according to their volume of activity, a certain amount, a financial security cousin, in order to withstand shocks. Whereas today, there are players who managed billions of euros in flows, while they had zero euros belonging to them to repay in the event of a glitch. At the smallest grain of sand, the thing exploded.
There are other rules as well. For example, we will have rules to prevent market abuse. To put it simply, today, you have crypto exchanges on which the price is formed (if bitcoin is worth $26,532 at any given moment, it's because on three crypto exchanges, it's at that price on average). The formation of this price, finance showed that we could engage in criminal or fraudulent behavior: make false orders, have people with access to privileged information and that they used to trade,..., basically financial fraud. Today this fraud is not regulated in crypto. So today, we know that market abuses are being committed. We don't know when, we don't know how much, but that has an effect on the price. With MiCA, you are going to have these types of rules that are going to be put in place. With MiCA, crypto is going to be at the same regulatory level as the rest of finance
What are the implications of the fiscal framework in France?
The French framework has had a simplifying effect on two aspects.
Already, we don't take crypto - crypto transactions into account. What matters is when you get out of crypto. If you use your bitcoins to buy a property or to make a cashout in Fiats in euros, that's when it creates what is called “a tax-generating event”. It's much easier because if you do well, you stay in stablecoin or crypto, you can trade, and in fact you pay taxes when you really use your crypto “in the real economy.”
The other simplifying aspect is the flat tax that applies to financial instruments. In France, it is 30% on realized capital gains (gains). If you don't make money, you don't pay taxes.
Adoption of the DAC8 directive: what impact?
This directive is the simple idea that in order to monitor capital movements, there must be a sharing of information between the different countries and between the various actors. It has existed for a long time in traditional finance. Now, it's just been transposed to crypto.
Until the entry into force on January 1, 2026, if you open an account on an exchange platform in Japan, Korea or the United States, the French tax authorities may ask for information. It takes time, but it's possible. Now, what will happen once DAC8 comes into force is that the platforms in each country will automatically report the information, and the tax administrations of countries that are signatories or members will be able to have information on, basically, what you have in crypto on this or that platform. It's intrusive, but it will help fight tax evasion.
You have to know what you want. If we do not want regulation, we remain an uninteresting economic sector, which will be on the margins of society. In my opinion, this is the condition for being accepted into the rest of the economy and for the common vision of people on crypto to no longer be “a thing for laundering and for fraud”. You must abide by the same rules as those of traditional finance. I don't see any reason for my parents to be subject to rules on financial instruments and for me not to follow them on cryptos. At some point, you have to balance things out.
The difficulties of crypto players to comply for MiCA
You have to understand something very macro and very global: the crypto sector was regulated extremely quickly. This is interesting because the origin was very “libertarian, rebellious, anti-regulatory”, and the reality is that in my opinion no sector has been regulated as quickly. We went from “nothing” to “upgrading with regulations that are 40 years old in 5-6 years”. It's super fast. For payment services, it was a journey that had lasted fifteen years. Banking regulation is 70 years old. MICA is an extremely important step to take. In fact, under the umbrella of the PSAN registration in its 2019 - 2020 version, it was only necessary to be a tech or entrepreneur to access the French market. There are people who created boxes with little money. They managed to get their PSAN with their teeth, to access this market, and that created great stories. There were also failures.
At the moment, we are in the process of moving to a “fintechization” of crypto. Today, doing the PSAN approval (which is more restrictive than the PSAN registration) or the MiCA approval is expensive. And it's not just about the money. You have to recruit profiles, you have to have a regulatory spirit and culture. All this creates entry conditions that are much higher and that mean that the profiles who will succeed will not be the same. In concrete terms, if you cannot raise a few hundred thousand euros or even a few million euros, as in the rest of the FinTech sector, it becomes very complicated. Whereas before a PSAN cost a few tens of thousands of euros.
So that's the big change for me, and it's something that's going to be visible to consumers.
MiCA: an advantage for approved actors vs. international players?
It's interesting because I was talking about exactly this subject with an American lawyer 2 days ago, who therefore had a US prism. What we said to ourselves was that regulation is never a competitive advantage in itself, it is never the ultimate competitive advantage. We are regulated in a market where we have something to do. Regulation follows the project, not the other way around. It's not “I have MiCA so I'm going to become a super Bitcoin project”, and luckily.
MiCA will be the condition for accessing the European market, which is a big market, we are talking about 400 million Europeans. MiCA is an advantage because it provides clarity. This clarity is a huge advantage compared to what is happening in the United States. Today in the United States, we don't really know how to comply with regulations. There are conflicting injunctions. There are agencies that wage war on each other a bit, it can be resolved in court. That is really the negative of MiCA. MiCA has a lot of rules but at least it's clear, it's published two years in advance, et cetera. One can criticize the high level of requirements, but the United States is really “they throw you in the pool, and if you can make it to the edge, bingo.”
I think that where there is still an economic effect that will be significant with MiCA, it is that we will have a single market in terms of regulations, which will promote a phenomenon of homogenization of players in Europe.
In other words, a good local player can become a regional player. And conversely, it will also be an advantage for the big global players who will be able to comply much more easily in 27 countries at the same time.
Is MiCA going to become the example of global crypto regulation?
I am not very chauvinistic. I'm not very “Cocorico” in “I don't think we're going to be a model for the world” mode. But on the other hand, what is certain is simply that MiCA is a financial text. When you do a little bit of financial law, you realize that there are rules that are a bit the same, regardless of the activity. MiCA is going to be a model in the sense that it is the first time that we have something written and posed, and that concerns the entire market. Afterwards, will people copy and paste, I don't think so. They are going to adapt. And again, regulation is still something that is regional.
Of course, for Americans today, it must be strange to think that on the other side of the Atlantic, they have all the answers to the questions we are asking ourselves in a text that is opposable to the equivalent of the SEC. Again, regulations constrain, but they also protect actors. After that, I am sure that in the United States, we know them, they are violent. There, they are violent in repression. I am sure that at some point they will pivot, they will be violent in a pro-regulatory sense. In any case in their market, I think it will go well.
The role of the FTX case in accelerating regulation
In reality, FTX's regulatory relationship is colossal. The FTX case was really one of the rare moments in crypto, with also the subject of Libra, which is the Facebook stablecoin, where all the central bank committees, regulators, ministries of the economy and the boards of all the big world banks had meetings on crypto. It was both moments.
It was “we may be uberized by Facebook and that's not ok”, and besides they sunk the project, and it was also “in fact crypto, not only are there scandals that are possible, but they are starting to be important”. It is a sector that is capable of doing Madoff. It's a sector that can be really dangerous, with millions of people losing money. And so obviously, for regulation, there was an important change in gear, because in the United States, it gave food to the SEC, which is a fairly aggressive regulator with crypto, which really wants to enter crypto into financial law, a bit crowbar, with a hammer. And in France we saw it. In other words, regulatory strengthening was a logical consequence. And I know that because I had the chance to have meetings on this with some decision-makers, and they said to me, “Well, you're telling us you need time and so on, but that's not the point. There is FTX, there are victims, so now we are going to strengthen.” There were steps, that's why we had a reinforced PSAN registration, an optional license, and so on. The idea was to walk up to MiCA, but the debate about pushing MiCA back was over.
Could the FTX case happen again?
That is a very good question. Life is ironic, because in fact, FTX has nothing to do with crypto, and FTX has little to do with regulation.
It's Madoff. And Madoff, it was regulated. He was a guy who had his card, license, et cetera. So in fact, when someone produces fakes and is smart enough to lie well, it can last a long time, and it can hurt a lot. Whatever the system.
Then, where there is a downside anyway, and we were talking about it just before the show, is that with FTX, there was first FTX fraud, and then there was contagion in the crypto sector. This contagion could be limited by regulations that will require controls between actors and in particular to have this famous safety cushion with this level of equity, so there will still be a post-MICA difference.
FTX is a scam, it's fraud. So Sam Bankman-Fried, SBF, is someone who is very likely to go to prison for a long time. He is presumed innocent for now, but hey, anyway, that's the point.
FTX was regulated in the Bahamas, they were regulated by the Bahamas regulator who again proved that it had a very strong demand on local players. No but hey, seriously, he was an unregulated player who highlighted a bit of a lag in the global crypto sector. In other words, the fact that there are actors in the Bahamas, or in the Seychelles, and that everyone thinks it's ok, it's not normal.
This is something that is changing, especially with regulations, especially following the backlash of the FTX case. But when I talked about it with experienced traditional financial law lawyers, they said to me “in fact, your sector is finance in the 70s”. The same things were happening 30 years ago or 40 years ago in Finance.
The impact of regulations on bitcoin adoption and the price
Regulation is an acceleration factor. Again, if you start at six months, it has no effect, or even negative effects, because it slows down entrepreneurs. But democratization involves regulation. And it actually makes a lot of sense. Regulation is the opposite of “do your own research”, it is the opposite of “manage yourself, we are between experts, we are a community”.
I remember, the Bitcoin community in Paris, 6-7 years ago now, everyone knew each other. So in fact it was almost settled in coffee. I am caricaturizing, but they were interpersonal relationships. Well, that works at 200. But hey, when we have 8% of French people who have crypto, it's over.
The law on influencers
The influencer law starts from a very simple observation. If we come back to reality, there is a drift in the world with influencers. We know that, and it has become a subject. Deputies heard about it on Sundays when they went to the market and shake hands with their citizens. That's the origin of the law on influencers, that's no other Thing. He There are 30 deputies who are starting to say to themselves “Ooh my, this is a national subject”, and presto, it was a transpartisan bill, adopted very quickly because it was consensual, while we are in a National Assembly where, I remind you, there is no absolute majority.
And it turns out that crypto has been the medium for a lot of disturbing or harmful behaviors on the part of certain influencers, many of whom are not in France but in Dubai.
They created a law, we had debates. Moreover, at a conference we met Stéphane Vegeta who was the rapporteur of the law and who came to discuss it. They made a law to regulate certain practices made by influencers, and in particular the wholesale ban on promoting cryptocurrencies, tokens, NFTs,..., except when it is in compliance with the regulations (= except when the actor behind the project has a PSAN registration). Basically, it's an idea where influencers who are outside the scope of financial regulation are asked to respect financial regulations.
Personally, I have two doubts about this law.
The first is that the financial world is a world where there are identified companies, there are not 300,000, we know them, they are established. They have human resources, they have a roadmap to comply. On the other hand, influencers, I don't know what that means. For me, it's a sector where there are hundreds of thousands of people, you can be an influencer with 400 followers, you can be a micro influencer, so this thing of saying to yourself “we're going to regulate people who are totally atomized”... I don't really believe in it. That is why I have doubts about the effectiveness.
And the other point is that in my opinion, the MPs who worked on this law did not have enough time, or did not take enough time, to understand how the financial world worked. Why is there no problem with influencers and financial instruments? Because the financial world, and this will be the case of crypto with MiCA, controls its communication because it is supervised by its financial regulator. It's part of all this regulatory framework that we were talking about.
Today, we are in a bit of an in-between. For crypto, there is no communication control, but that will come in a very short time. In a year, we will no longer need this law, because actors who sell crypto will have to control their communication, otherwise they will automatically have to deal with their financial regulator who could withdraw their license. So for me, this law, I understand it, and I think that it is absolutely necessary, but I think that on crypto there was a problem of coordination with financial regulations. We will end up with two regimes in parallel, which regulate the same thing in the same way.
PSAN, MiCA, influencer law... end of the race for crypto regulation?
It's not the end at all. There are other topics at the moment but which are far from Bitcoin. In particular, NFTs and Web3 games are in the process of being regulated.
Today, for the financial part of crypto, there is a framework in place, from the decision to invest to the taxation of earnings. So the circle is full, even if it will evolve all the time. On the other hand, what is interesting is that this technology is not intended to stop at financial use cases. It is “contaminating”, if I may put it that way, other use cases in video games, there are Web3 CRMs,..., and that therefore brings new topics.
Currently, it is Web3 games, so games like Sorare for example, or games with NFT cards, that are being framed. This is a subject that emerged a year and a half ago, and today we have a law. So same, it's a new regime.
And maybe in three years, we'll have a law on artistic NFTs or commercial NFTs made by big brands. And in ten years, there will be other topics that we don't know about today.
William's personal Bitcoin predictions
I have some beliefs about the Bitcoin.je I don't see it as something that will replace the euro, I see it more as a kind of insurance policy. That is to say, when there are shocks in the traditional sector, the “system”, I think that bitcoin benefits.
It is also a form of investment in all these technologies. Both the Bitcoin protocol and everything called blockchain. Investing in bitcoin is a way of exposing yourself to this and of making a bet on this subject, a bet that for me is winning.
After that, in terms of prices, I don't have much of a prediction. I like Yves Choueifaty's theory that it's going to be “either zero, or more than a million”. I think his theory is based on the fact that Bitcoin will replace gold. So in fact, given the limited quantity of Bitcoin available in circulation, its price will be extremely high. For me, this is not so much the subject, because it is only interesting for people who can buy an entire bitcoin, when in fact, as we go along, we will buy satoshis (bitcoin cents).
