France Tightens Grip on Crypto Exchanges: Proposes Strict Liability for DeFi Access

Expanding Liability for Bridging DeFi Access

France’s regulatory bodies are charting an increasingly interventionist course for crypto exchanges, particularly those facilitating customer access to decentralized finance protocols. In a Wednesday proposal responding to the European Commission’s broader consultation on the Markets in Crypto-Assets Regulation (MiCA), French authorities have unveiled a comprehensive set of requirements designed to reshape how platforms operate at the intersection of traditional finance and decentralized systems.

The proposal, jointly submitted by France’s Treasury, Financial Markets Authority (AMF), the central bank, and the Prudential Supervision and Resolution Authority (ACPR), argues that crypto-asset service providers (CASPs) should be held liable when they facilitate customer access to decentralized protocols—particularly if they’ve failed to properly vet those protocols or ignored known security vulnerabilities. Under MiCA’s current framework, services provided in fully decentralized ways without intermediaries fall outside regulatory scope. France’s proposals would change this by imposing new compliance duties on regulated platforms serving as gateways to DeFi, effectively extending the regulatory perimeter to capture hybrid business models that have become increasingly common across the industry.

Vetting, Monitoring, and Tiered Compliance

To prevent customer losses, French authorities propose that platforms implement rigorous vetting procedures for DeFi protocols before offering access, continuously monitor them for vulnerabilities and suspicious activity, and support emerging certification frameworks for both protocols and smart contracts. The compliance requirements would scale based on platform size—larger significant CASPs would face comprehensive requirements while smaller providers would operate under proportionately scaled obligations, creating a tiered regulatory framework.

Importantly, the proposal doesn’t mandate platforms exclusively offer certified protocols. CASPs could continue providing access to uncertified protocols if they conduct thorough due diligence and furnish customers with enhanced risk disclosures, preserving flexibility. The French position also stops short of blanket certification requirements for self-custodial wallet developers, instead backing voluntary certification for advanced wallets that integrate DeFi services, suggesting regulators recognize that overly rigid rules could stifle innovation in custody solutions.

Regulatory Consolidation and Timeline

Beyond DeFi specifically, France’s proposal advocates for shifting supervisory authority over “significant CASPs” from national regulators to the European Securities and Markets Authority (ESMA), alongside lowering the current user-based thresholds for identifying which platforms qualify as significant. The authorities also urged a comprehensive review of how MiCA handles asset-referenced tokens, noting that none have successfully gained authorization under the current ruleset.

The European Commission is scheduled to deliver a comprehensive report to EU lawmakers by June 30, 2027, which may include formal proposals to amend MiCA based on this consultation feedback. These developments underscore how major economies are increasingly viewing crypto infrastructure as integrated financial markets requiring deep regulatory supervision rather than alternative systems operating in parallel.

Tighter DeFi oversight and platform liability could accelerate migration toward regulatory-compliant solutions while potentially constraining decentralized alternatives, making the pace of global regulatory convergence a critical variable in determining crypto’s structural role within the broader financial ecosystem.

Source: French Financial Authorities, via Cointelegraph. Not financial advice.