Current Economic Situation in France
Source: IMF DataMapper
France is currently ranked the 7th largest economy in the world by Gross Domestic Product (GDP) and the 10th largest by Purchasing Power Parity (PPP). According to the International Monetary Fund in April 2024, France’s nominal GDP is $3.130 trillion and its PPP is $3.988 trillion, thereby contributing to up to 4% of world GDP.
The popular Western European country runs on an economy that is diversely structured. Its major economic sector is the services sector, constituting tourism, retail, financial services, amongst others. This is not unusual as Paris, the capital of France, is ranked first in tourist centers in Europe and the third worldwide. Apart from the services sector, the country also generates massive income from public revenue sources such as value added tax, corporate tax and income tax.
France’s thriving economy has also seen a great improvement in cost of living. Compared to the 5.66% of 2023, the country’s inflation rate now sits at 2.42%.
Although France was among the countries that slipped into recession in the 2000s, their economy has long recovered, breaking through several periods of stagnancy in growth. Their level of growth in less than 30 years is as a result of economic decisions driven by data-backed projections.
The Banque de France, the Central Bank of France, demonstrated the strength of the country’s economy through their macroeconomic projections released March 2024, as stated below:
According to our March interim projections, GDP growth is expected to remain sluggish in 2024, to stand at 0.8% (after 0.9% in 2023), before accelerating to 1.5% and 1.7% in 2025 and 2026, respectively.
In 2024, growth is expected to be driven more by household consumption than in 2023, due to the fall in inflation. In 2025, growth should also benefit from a recover in private investment, as monetary and financial conditions improve. In 2026, these trends should strenghten to generate robust activity.
Crypto Law in France
Source: Euro Company Formation
The legalization of cryptocurrencies and digital assets by France in 2019, under the provisions of the PACTE law, was backed by strict laws to regulate their operations and protect French citizens and investors against the risks associated with the blockchain market.
The PACTE law of 22 May 2019 stands for Plan d’Action pour la Croissance et la Transformation des Entreprises or, in English, the Action Plan for Business Growth and Transformation. Under this law, cryptocurrency businesses are recognized in two classifications: ICOs or DASPs. It is the collective responsibility of Autorité des marchés financiers – AMF (Financial Market Authority), French financial regulators, as well as Autorité de contrôle prudentiel et de résolution – ACPR (Prudential Supervision and Resolution Authority) to monitor the adherence to the provisons of the law.
However, it is the sole responsibility of the AMF to give approvals for crypto companies to operate within the country. Market operators can either apply for visa as a token or Initial Coin Offering (ICO) issuer, or approval as a Digital Assets Service Provider (DASP). Without a visa or approval, they are prohibited from making a public offering or selling digital assets. The approval of Binance Exchange in 2022 falls under the DASP category.
Meanwhile, the French law views digital assets quite differently. The law divides digital assets into:
- Tokens
- Virtual (or crypto) Currencies
- Non-Fungible Tokens (NFTs)
- Stablecoins
- Security Tokens
Based on this stratification, Article L54-10-1 of the Monetary and Financial Code states that digital assets, including cryptocurrencies and excluding financial instruments such as stocks and exchange-traded funds (ETFs), are:
A digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.
Whereas, the French law recognizes tokens as:
Any intangible asset representing, in digital form, one or more rights that can be issued, registered, stored or transferred by means of a shared electronic recording device (such as blockchain) making it possible to identify, directly or indirectly, the owner of said asset.
This clear division of the properties of virtual assets in France makes it easier for the regulatory bodies to monitor virtual transactions and movement of assets, and clamp down on financial crimes such as money laundering and activities that fund terrorism.
Current State of Crypto Adoption in France
Source: Statistica
Even before its legalization in 2019, cryptocurrency adoption has been on the upward trend in France.
Today, at least one in eight French nationals - about 18% of France’s population - own and hold crypto assets. This brings the current penetration (or adoption) rate of crypto currency in France to 27.18%, an impressive jump from the 18.43% of 2023. Interestingly, a higher percentage of French crypto users (57%) are below 35 years of age. Although 70% of French crypto holders are male, more women are demonstrating interest in acquiring digital assets, suggesting that France has a promising future in relation to cryptocurrency adoption.
However, French nationals seem to be operating on a similar level of risk consciousness as their central bank government. A new study shows that French investors only spend at most 10% of their savings on purchasing crypto assets. This study also reveals that the nationals have been hesitant to conduct cryptocurrency transactions (buying and holding) through crypto companies and exchanges. They have consistently shown more trust for their traditional banks.
Factors Affecting Adoption of Crypto in France
Source: ThinkMarkets Academy
Regulatory Frameworks
The high rate of adoption of cryptocurrency and other digital assets in France is largely influenced by their legalization by the Banque de France. In addition to regulation on licenses and taxes, the existing laws also caters to the protection of users and investors, which provides a safe environment for crypto transactions within the country.
Risk Appetite
There is a staggering gap in the gender demographics of French holders of crypto assets. Women represent 30% and men represent 70%. According to Contribune, the cause of this gap has been attributed to the inclination of men to take risks and explore emerging technologies. This, however, remains subjective as there has been no extensive study to support the claim.
Web3 Gaming Law
In April 2024, the French government put in a new regulation, officially known as “jonum” which stands for “jeux à objets numériques monétisables”. This regulation is for games with digital assets that can be monetized.
The Jonum regulation aims at distinguishing web3 games from other online games such as casinos, particularly to protect minor players from gambling addiction. Jonum is established as a three-year test model under the Securing and Regulating the Digital Space (SREN) Bill.
The implication of this test is that the findings of Jonum may influence the French government to either implement stricter or more lenient measures, which can inherently affect the adoption of crypto in the Web3 gaming niche.
Political Conditions
The President of France, President Emmanuel Macron, is most known for his vow to make France a ‘start up’ nation. The progress and success of this vow is evident in the policies, particularly in the digital assets sector, which he has implemented since the start of his tenure in 2017.
Even so, this progress may be facing a threat following the inability of President Macron’s to secure majority seats in the National Assembly. This change may launch France into a period of political instability, which may negatively bode on the financial markets.
Cryptocurrency companies operating in France may also be impacted by the plans of the leading party, the New Popular Front (NPF), to increase tax rates. A massive exodus of crypto firms from France is likely to influence the adoption rate of crypto in the country.
Conclusion
France has one of the most progressive economies in the world. It has maintained a good pace through its legalization and regularization of digital assets. French laws pay special attention to the different components of digital assets, including their risks and hidden clauses. This ensures that French nationals are properly safeguarded against onchain fraud.
The central bank of France has also shown its commitment to continually improving the French economy by ensuring that the booming digital financial sector is contributing to GDP, through taxes.
It is projected that by 2025, the adoption of crypto in France will rise up to about 17.72 million users. Yet, the world remains curious to observe how the budding political tension in the country will affect these numbers.
