The cryptocurrency industry was created out of the necessity to overhaul traditional finance. But it seems like the road to adoption is blocked by obstacles. The United States government and regulatory bodies seem to treat crypto as a risky endeavor and not an innovation that needs to be pursued. This hostile treatment has led to digital asset companies seeking refuge in friendlier jurisdictions. And France’s approach to crypto regulation looks promising.
France has emerged as one of the most crypto-friendly countries in Europe by offering more favorable and flexible regulations compared to the United States. Let us explore if France can compete with Hong Kong or Dubai to be a top crypto hub.
Why France is Better for Crypto Companies?
The French government has a clear and comprehensive legal framework for crypto assets and service providers. The regulation is based on the PACTE law that was enacted in 2019. PACTE is short for “Plan d’action pour la croissance et la transformation des entreprises”. It gives regulatory guidance on how to approach Digital Assets Service Providers (DASPs) and Initial Coin Offerings (ICO). The French Financial Market Authority (AMF) and the French Prudential Supervision and Resolution Authority (ACPR) are tasked with the implementation of these regimes. These institutions also have Fintech departments to welcome and assist innovative projects.
France has clearly defined utility tokens, cryptocurrencies or virtual assets, stablecoins, NFTs, and security tokens. This takes out the guesswork on how to define a certain asset.
In a nutshell, France is supportive of innovations as long as they are properly regulated. Government agencies are there to assist and give clarity, instead of regulating by enforcement.
How About Taxation?
Tax is a major source of income for the government. The French authorities have clearly defined how to tax digital assets in 2019. These guidelines clarify the tax treatment of crypto transactions and activities, such as capital gains, income, value-added tax (VAT), wealth tax, and corporate tax.
- Individuals need to pay a flat rate of 30% for sales of digital assets. This is the same rate for securities.
- Crypto companies (and exchanges) in France have to pay taxes based on how they are set up. These companies have to pay the normal business tax rate, which is between 15% and 25%. They also have to pay 20% VAT on services.
- VAT is not applicable to purchases of digital assets as a means for payment.
- ICOs are VAT exempt.
- Digital assets are subject to French inheritance tax.
Crypto is still subject to taxes and the rates are clearly defined under the law.
France as a Crypto Hub
Innovations, like crypto, just need some clear regulations to flourish. The majority of digital asset players are just waiting for a rational legal framework to follow. They are here to do business and not to break any law. U.S. House Representative Tom Emmer was right that the regulators’ hostile treatment of crypto is pushing capital out of the country. If the U.S. does not change its stance, then more companies will be forced to relocate.
France seems to be a great destination for crypto investors. The taxes are still high, but at least the rules are clearly defined Aside from favorable laws, the country is also a tourist and gastronomic destination. Ever wondered what it feels like to trade crypto while sipping coffee and looking at the Eiffel Tower at the same time?
The article is not financial, taxation, or immigration advice.
Images from Unsplash
