France proposes the strictest KYC rules in the world for crypto trades to fight terrorism

The French Ministry of Finance unveiled mandatory know-your-customer (KYC) requirements on all French cryptocurrency exchanges on Wednesday, a move that will strip French crypto users from their anonymity.

France proposes the strictest KYC rules in the world for crypto trades to fight terrorism

The French Ministry of Finance unveiled mandatory know-your-customer (KYC) requirements on all French cryptocurrency exchanges on Wednesday, a move that will strip French crypto users from their anonymity. The requirement of full KYC on all crypto transactions means every crypto exchange will have to verify identities of their customers, regardless of transaction size. The regulation is in direct response to series of terrorist attacks in 2019 after which the French police arrested 29 people in a vast operation to break a complex scheme financing Islamist extremists in Syria via cryptocurrencies. According to the decree, all digital currency exchanges must immediately begin verifying two forms of government identification, prohibiting anonymous crypto accounts, and recording all crypto transactions worth more than $0, according to the press release from Finance Minister Bruno Le Maire. Currently, France’s rules require KYC measures only on crypto-to-fiat transactions over 1,000 euros (about $1,200). Including crypto-to-crypto transactions for the KYC and removing the exclusion criteria for transaction size makes this "harsher than any other jurisdiction," said Simon Polrot, president of French crypto association ADAN. Currently, the mandatory registration rule targets crypto custodians and crypto-to-fiat exchanges, who will have until December 18 to comply to avoid fines or possible imprisonment. Legally, France considers bitcoin a "consumable asset", like a legal currency, that are consumed to pay for goods or services. Pierre-Guy Bareges, chief technology officer of Digital Service Group, and Nicolas Louvet, CEO of Coinhouse Group, told The Block that the heightened restrictions will raise the cost of compliance and onboarding from about $1 per user to $5 per user, and Bareges noted that it could cause customers to move to foreign exchanges with less regulation.