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Pierre Person: "We underestimate the weight of the banking lobby".

Pierre Person: "We underestimate the weight of the banking lobby".

👉 News. MP (LREM) Pierre Person, who is not standing for re-election to the legislature, is this morning delivering his latest report on crypto-assets.

👉 The context.The crypto market has exploded since 2017.

👉 Why it matters. In his report, the elected official proposes several strong measures on stablecoins and mining.

The Big Whale: Before you leave the National Assembly, you are delivering a final report on cryptocurrencies. What do you expect from it?

Pierre Person: This report should be useful to the next generation of elected representatives. Many of those who will be entering the Assembly will at least have heard of crypto-assets, if they don't already have them. However, owning them does not mean understanding all the issues involved. Far from it! Although around twenty Members of Parliament probably own cryptos, just because you own bitcoin or ether doesn't mean you understand the transformations at work. This report will give my future colleagues a glimpse of the depth of the subject. What's more, this document is an opportunity for me to continue to educate people about a complex technology that is turning many things in our societies upside down.

For five years, you've worked so hard on the subject that you've been dubbed the National Assembly's "crypto-MP". Why crypto?

I was elected in 2017 at a time when the cryptocurrency market was experiencing a bull run. At the time, bitcoin had risen from $1,000 to almost $20,000 in less than a year. There was a lot of media coverage, which prompted politicians to take up the issue. The Finance Committee proposed working on the issue, and I offered to be the rapporteur because I was familiar with the subject. I didn't want us to produce another report that, as with the Internet, missed the real issues. So much ground has been covered since 2017. We forget it, but at that time the French ecosystem was in its infancy and few people were aware of the potential of the technology. I rewatched some of the 2017 hearings for the first report, and it's impressive to see how far we were starting from.

What has evolved so much?

About everything. On a daily basis, we see the difference with the new "bull run" of 2020-2021. The number of users has exploded, and companies are getting on board. Today, according to several surveys, it is estimated that around 10% of French people have cryptocurrencies. The market is nothing like it used to be. Five years ago, you could interview 100 people and you'd have covered the whole crypto ecosystem. For this new report, I've interviewed several hundred people, sometimes without managing to get to the bottom of a sector.

And what about usage? Do you feel that things have changed?

In 2018, the only uses for cryptos were payment and ICOs (Initial Coins Offering). We focused a lot on the monetary aspect. But today I'm putting that debate completely out of my mind: Bitcoin is a currency, for two reasons. On the one hand, its users see it as more than just a means of exchange; it can also be a store of value. In that sense, I'm aiming for Satoshi's self-fulfilling prophecy. On the other hand, bitcoin is recognised as a national or foreign currency by some countries. Its legal status makes it a currency in law. So let's stop wasting time on currency classification! In 2022, the issues are complex and numerous: monetary geopolitics and the future of sovereignty, the emergence of new forms of legal entities (DAOs) and their governance, the transformation of financial markets through on-chain and off-chain assets, the banking revolution and finally the emergence of Web 3.0. These transformations are abysmal.

You talk about governance. What do you think of DAOs (Decentralised Autonomous Organisations)?

In the future, DAOs will substantially change relationships within communities. In contrast to the pyramidal model that predominates today, these totally horizontal forms of organisation will enable decision-making to be distributed among each individual, according to predefined rules that are binding on all. This is a real revolution in democratic governance. As well as organising the life of the city, DAOs could also be applied to other human organisations such as associations and businesses. Everyone needs to get on board.

You've seen a lot in five years. What is your biggest frustration?

We haven't done enough. I have done more work with the Ukrainian Deputy Prime Minister for Digital, Mykhailo Fedorov, on the uses and regime of crypto-assets than with our French elected representatives and Bercy. The Spanish government and members of the Belgian and German parliaments have also come to meet us for discussions. Across the world, we received numerous requests for information. On the French side, the approach was the opposite. A majority of MPs have not yet grasped what is at stake. Every time there is an amendment, a third of them snigger, a second equates it with financial lobbying and the final third say "bravo" but don't vote in favour. I regret this, not for myself, but for my country!

Our stance is terribly conservative. Cryptocurrencies are intrinsically revolutionary in the sense that they overturn the established order. Our desire for revolution and emancipation has dwindled considerably and that says a lot about us culturally. We have become risk-averse. However, we must do something about it and change our conservative reflexes, otherwise we will be sidelined by this technological breakthrough. The consequences will not be essentially economic, as was the case with the Internet, but much more far-reaching. From a factual point of view, we keep repeating it, but we have everything we need to be leaders. We have the best developers, the best mathematical engineers who are inventing the tokenomics of tomorrow, but the rest is not keeping up.

Where does the problem come from?

The problem is global, but the first reason is the lack of political will. If politicians wanted to, they could! It's simply a question of priorities. It should be pointed out that politics is not just a matter for elected representatives. The decisions of certain players are intimately political.

In France, the strength of the banking lobby should not be underestimated. It has to be said that part of the senior civil service has close ties with the French banking sector. This is not a question of direct or individual economic interests, but above all of an inability to imagine a different world when one's entire career has been spent between these two environments. This is not conspiracy theorising, which I abhor. Unfortunately, these nauseating theories often permeate the crypto ecosystem. Far from supporting it, they reflect a refusal to see the complexity of the world, our societies and the individuals who govern us. The latter are not fundamentally opposed to cryptos, but this decentralised logic is contrary to their intellectual construction.

In 2018, much has been undertaken by the banking sector to minimise the "right to account" of crypto players. Yet these transparent provisions, brought forward in particular by MPs Laure de la Raudière and Jean-Michel Mis, could have given visibility and security to entrepreneurs. We have had tough discussions with the Banque de France, the Autorité de contrôle prudentiel et de résolution (ACPR) and the Caisse des dépôts. This is one of the few amendments voted against the opinion of the rapporteur and the government, proof, if any were needed, that parliamentarians had been convinced of the need to move on this issue. This provision designated Caisse des Dépôts as the bank of last resort, providing a safe haven for crypto players. During the vote, tensions ran high. The government was seeking to strike a balance between the demands of regulators and those of economic players. And who was exerting pressure? The banks. They wrongly considered that crypto players would not be able to check the anti-money laundering and anti-terrorist financing rules.

In the search for a compromise, I relented considering that PSAN approval would be able to guarantee banking players compliance with the requirements. Four years later, this is not the case! French commercial banks are still as closed as ever, even though the LCB-FT (anti-money laundering) rules are strictly applied by the ACPR. In 10 years' time, the banks will certainly regret this.

In an interview with The Big Whale, the Head of State explained a few weeks ago that cryptos and Web3 were an opportunity for France and Europe. Do you feel that his views on the subject have changed?

The subject has become unavoidable (laughs).

What do you recommend in your report to avoid missing out on this unavoidable subject? What is your most important measure?

Beyond a miracle measure, I wanted to emphasise the geostrategic dimension of the issue. The battle that is being waged is less a battle between private companies against the public authorities, like Facebook's Diem (ex-Libra) project, but much more a monetary war between the world's major zones of influence. In this new ultra-digital world, sovereignty cannot be asserted through standards alone. It is created above all through economic competitiveness. For example, the Tether and Circle stablecoins contribute to the economic and monetary hegemony of the United States. While it is true that in the coming weeks the United States will be drawing up its first regulations dedicated to dollar stablecoins in order to avoid any systemic risk, unofficially it is looking favourably on the possibility of extending its currency a little further into the digitised economy. These players are an incredible monetary expansion tool for them. What's more, if crypto becomes tomorrow's new finance, everything will already be denominated in dollars...

Is Europe already lost?

Not yet, but the choices made regarding future texts will be decisive. If we take the opposite path to that taken by the Americans, we will suffer the same immediate consequences: we will have no players of systemic size and we will be unable to regulate those of other countries.

For the most part, American hegemony stems from the strength of its currency. The dollar is a powerful tool of coercion for those who hinder the economic development or security of the United States. What's more, the Americans have no intention of allowing themselves to be challenged by the Chinese on this currency front. Washington has certainly put forward the idea of a digital dollar, but it is not a priority. The stated aim is to promote the development of the dollar. Tether and Circle fulfil this role perfectly. On the other hand, Europe has no proactive policy in this area. It is imperative that there is a rebalancing with the arrival of euro stablecoins.

What about China?

The Chinese government has said it is against cryptos because this technology is decentralised. It is contrary to the foundations of their political model. On the other hand, the centralised digital yuan is a powerful weapon, particularly abroad. In the future, Beijing will control all flows and the resulting data. Africa will buy goods and services in digital yuan. For China, this is an additional means of influence. For its part, Europe lacks a doctrine and a vision. It needs private stablecoins because they will be the new standard for tomorrow's electronic money. It is the indispensable layer for creating the autonomous banks of 2030. Private stablecoins do not deprive states of their monetary sovereignty, but are complementary to central bank currencies.

Where do we stand on the central bank digital euro?

I am very pessimistic for several reasons. Many aspects have not yet been decided. We don't yet know whether we want a wholesale or retail euro, or both. The digital retail euro will lead to a new paradigm of monetary issuance, which calls into question the role of commercial banks. In addition, the nature of the digital euro needs to be clarified: will it be anonymous or pseudonymous; decentralised or totally centralised, etc.? In the same vein as the debate on the "transfer of funds" text, it seems inconceivable that an independent administrative authority or a public institution should have access to citizens' financial flows without safeguards. That would be madness. In a state governed by the rule of law, if there are suspicions about a transaction, the intervention of the judicial judge protects against arbitrariness. Only the judicial authority could order the lifting of pseudonymity, otherwise it would be liberticide.

What do you think should be done?

A democratic decision is needed. How can we imagine Christine Lagarde, despite her skills, deciding on her own which currency model we should adopt? This is a political issue. The digital euro cannot be the project of the European Central Bank (ECB) alone, deciding on a new form of our common currency because we felt 30 years ago that it was independent. Just as the euro was the fruit of political will, the digital euro must above all be a democratically validated tool. This choice belongs to the citizens and the elected representatives who represent them. To do so, they must honestly understand what is at stake. The ECB announced the digital euro in response to Facebook's Diem project, and in order to preserve its sovereignty vis-à-vis private financial players. This is not the real issue. The euro's competitor is not Facebook, but other currencies...

During the public consultation on the digital euro, those polled focused above all on anonymity and yet that doesn't seem to have been retained...

That's the whole problem. If we have a centralised euro managed by the ECB and whose transactions are not even pseudonymous, I don't see how it will be adopted. A currency is adopted when people have confidence in it. If the project goes ahead as it is, we could for the first time in modern monetary history have a state currency that is not accepted by the public.

In your report, you place a lot of emphasis on the need to harmonise and simplify European rules, why is that?

For too long we have been competing with each other in Europe, believing that this was the alpha and omega of economic growth. But it wasn't. With the harmonisation of the rules on cryptos in the European Union, we will succeed in creating a homogeneous and stronger market. However, while the idea of common regulation is positive, I'm extremely pessimistic about the turn of future texts, from MiCA (we talk about it in the Premium version of The Big Whale) via TFR. The reasoning behind extrapolating the same rules to the same activities is absurd. These days, regulation is designed around ultra-centralised mechanisms operating through the intervention of third parties. Tomorrow, processes will be automated and trust will be acquired through code. So why should we want to copy the same rules? It makes no sense! We need to invent new frames of reference for tomorrow's regulation. Fighting a DeFi (decentralised finance) protocol by going after the developers on Discord is definitely not a solution for the future.

How do you explain that some MPs are so opposed to the crypto sector?

Some haven't taken the necessary time or don't have the inclination to understand the subject, while others take advantage of the opportunity to make intemperate comments in order to ensure low-cost visibility.

In your report, you also mention mining activities. What is your view of the sector?

Bitcoin's energy expenditure alone does not make it a polluting asset. Of course, sobriety does no harm, but our salvation will come first and foremost through technology and not through energy reduction. The issue is not so much whether certain cryptocurrencies consume energy. Yes, they do. The important thing is to know where this energy comes from and what it is used for. Rather than banning Proof-of-Work (PoW), I was in favour of banning mining on carbon energy and when it deprives civilian populations of constant electricity. The fact remains that Europe wanted to ban practices that do not exist on its territory. What's more, this approach represents a break with the principle of technological neutrality. When it comes to email and other tools, no one asks any questions.

What do you think of bitcoin? Are you what we call a maximalist?

I'm crypto-curious. I have several cryptos. I think Bitcoin has a role. Its limitations confine it to the role of digital gold standard. From Cosmos to Ethereum, via the future layers 2, Starknet and others, each will have a place in the ecosystem.

The war in Ukraine has reignited the question of the role of cryptocurrencies in circumventing sanctions. What are your thoughts on this?

All the countries outlawed by the American-dominated international financial system will obviously be interested in unthinkable objects like Bitcoin. There is no moral aspect to this, this use will be factual. It does not make cryptos the object of a crime, but a vehicle for value. No one has thought of banning the dollar when we all know what it has been able to finance. Renowned French service providers were already using it before the invasion in order to trade with Iran. The creation of a new monetary network in Asia and the Pacific, the possibility for Russia to extricate itself from some of the sanctions, and the ability for Africa to eventually create a more solid banking and monetary network are all medium-term prospects. You have to be able to study the facts and act in a balanced and far-sighted way.

Are you optimistic about crypto in France?

I have to be! However, as it stands, I am convinced that it is entrepreneurs who will help this technology to evolve and grow.

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