Inside France’s courtship of Binance

Ten years ago, France had an innovation problem. Despite training top engineers and financiers, the country struggled to build successful homegrown start-ups and attract venture capital. Its boldest scientists were flocking to Silicon Valley.

Then came Emmanuel Macron. Vowing to make France a “start-up nation” the former financier set out to shake things up. He brought in tech visas, boosted public grants and relaxed investment rules to foster entrepreneurship. 

Their zeal to attract tech companies to invest in Paris has attracted US giants like Google and Netflix, as well as helping establish a stable of domestic “unicorns”. But in seeking to cure its innovation problem Macron’s government has taken risks. The open-door policy might yet become an embarrassment around crypto in particular, as its courting of Binance has shown.

It all started when Changpeng “CZ” Zhao met Macron at the Elysée palace in November 2021. That same month, Binance said it would invest €100mn into France’s burgeoning crypto scene — a pledge dubbed “objective moon” by its founder. The courtship culminated with France’s Autorité des Marchés Financiers, the financial watchdog, granting the exchange regulatory approval last May — a move that contrasted sharply with other national regulatory stances. 

Cue the honeymoon phase. In October last year, CZ headlined France Fintech’s flagship conference in the business district of La Défense. The industry’s best-known founders, including Cyril Chiche of payment app Lydia, lined up to shake hands and be photographed next to him.

A person familiar with the discussions told the FT that the French government granted Binance more than a hundred tech visas to help it grow its operations on French soil. On stage, CZ joked that he was spending so much time in France that he had started to buy his socks in Paris. (I later asked if he also paid taxes there, to which he said he had no awareness of his own fiscal residency.)

French Minister of Economy and Finance Bruno Le Maire last year told BFM Business that he was “proud” of Binance’s French registration. Attracting foreign players including Binance was key to France’s bid to become a “European hub of the crypto assets ecosystem”, he said.

This initial courting was taking place when crypto was still hot. The industry has since suffered a few reputational hits. Sam Bankman-Fried fell from grace and was convicted of fraud and money laundering in the US. Regulators were also scrutinising Binance, leading to its guilty plea last month to criminal charges related to money laundering and breaching international financial sanctions. In France, authorities are investigating the exchange for having allegedly advertised and promoted its services before it was allowed to operate there. 

One may expect recent events to have rocked the nascent relationship. But the French government appears to have remained under Binance’s charm.

Following the collapse of FTX, French legislators beefed up the requirements for newcomers wishing to set shop in the country. Getting an Autorité des Marchés Financiers registration will from January take into account new criteria including having a resilient and secure IT system and a process to manage conflicts of interest. But such requirements will not apply to companies already registered with the AMF, including Binance.

The government also resisted pressure to bring forward to October 2023 the deadline by which registered crypto companies are forced to apply for a regulatory licence, claiming it might make investors “flee” the country.

Under the revised legislation and European law, Binance’s French regulatory status means it is set to benefit from an 18-month grace period before it has to apply for a licence as mandated by upcoming European law, meaning it is able to keep operating on a local registration until July 2026. 

For companies that are already registered, “the least I can say is that the government was not in favour of making the regulatory framework tougher,” said Hervé Maurey, a senator who was involved in the negotiations. “What we are putting in place will allow us to control the arrival of new players but not so much those who are already here.” 

Last month I spoke with a member of Macron’s parliamentary majority who reiterated that France had been right to embrace the exchange. Binance’s presence was a testament to the country’s changed attitude towards innovation, he said. I suggested it may also be a testament to its changed attitude towards alleged financial crime. You never know who might become “the next Google”, he replied.

Less than three weeks later, CZ resigned as Binance CEO and pleaded guilty to a US criminal charge related to money laundering. He could face up to 18 months of imprisonment.

The parliamentarian also made a fair point: French regulators were among the first to create a regulatory framework for digital asset providers, which formed a template for Europe’s upcoming Mica regulation. Under a two-tier system, Binance has only been granted a registration rather than a full-fledged licence that offers consumer protection. Only the exchange’s French operation is allowed to operate in the country and certain activities such as futures trading are banned in France.

But a closer look at Binance’s activities suggests the exchange may have pushed the limits of its strict regulatory mandate.

Behind a seemingly benevolent charity programme, Binance has used aggressive tactics to solicit people to use its services in some of France’s most deprived areas. Far from its glitzy office in Place de la Bourse, the company has targeted banlieues such as Aulnay-sous-Bois and Montreuil. 

Its promise was to train students from all walks of life with the technical skills required to find employment in blockchain-related industries, including as engineers. The goal was to reach 10,000 students by the end of this year.

Last October, I attended one such “awareness” course in Aulnay-sous-Bois, a suburb of Paris known for its poverty and crime rate. It lasted half a day and consisted of a slideshow on blockchain technology followed by a short practical exercise with Solidity, a blockchain programming language. 

In class, students received Binance goody bags with branded hats, promotional leaflets, pens and notebooks. They were asked to download MetaMask wallets, software that allows access to decentralised applications and storage of digital assets including unregulated financial instruments.

French regulation does not allow registered crypto companies such as Binance to make unsolicited approaches to prospective customers for marketing purposes. Doing so is a criminal offence which can result in fines of up to €7,500 for individuals and €37,500 for companies, according to Henry des Horts, a financial regulation lawyer at Addleshaw Goddard.

Binance France said: “We recognise that digital education and skills development can be out of reach for many, resulting in a blockchain industry that lacks diversity and talent. The Binance Scholar Program helps to change that, covering the costs of tuition and course fees at some of the world’s leading universities, colleges and vocational training providers.”

Bryan Houblon, a then-24-year-old attendee from Bondy, was retraining as web developer after his philosophy degree failed to secure him a job. “They told us that a junior blockchain developer could earn 100K per year so obviously we all had starry eyes — it’s attractive,” he said.

For Terry Jenly, a student from Aulnay-sous-Bois who was part of the same cohort and was 20 years old at the time, the gifts were a sign of CZ’s charitable streak. “The Binance T-shirt I got is of amazing quality so it’s always a nice touch,” said Jenly. “Maybe CZ had a childhood like us in the banlieues and that’s why he wants to share with the less fortunate.”

In class, Houblon was told that he needed a Binance account in order to receive his NFT diploma after the half-day course — a proof of ownership and security, said his teachers. He started the registration process during the lesson but did not complete it.

“I started to create the Binance account because they asked me to and now they are harassing me with follow-up emails,” said Houblon, who received 17 promotional emails, seen by the FT, in the month that followed his lesson. More than a year later, Houblon is still receiving emails from the exchange, including some urging him to redeem cryptocurrency vouchers on the platform.

Neither student had signed up to take the class voluntarily. They were made to participate as part of a retraining course subsidised by the government and hosted by coding school Simplon.

“This looks more like a marketing operation than anything else,” said French MEP Aurore Lalucq who last June opposed France’s registration of Binance. To her, the initiative looked like an attempt by the platform to find new users in vulnerable areas disguised as an educational project.

“Many companies set up foundations to work on projects which are normally unrelated to their commercial interests like fighting discrimination, or advocating for women . . . but I struggle to see the educational value in this”.

Out of the 10,000 people Binance has targeted to train by the end of 2023, less than a hundred will have received coding lessons. The rest are set to receive “awareness courses”.

One person familiar with the outreach programme who asked not to be named said Binance’s main “KPI” (key performance indicator) for the charity initiative was “user acquisition”.

Asked about his due diligence, Simplon founder Frédéric Bardeau said he felt safe partnering with Binance because the trading shop had been vetted by both France’s government and its market regulator.

When I rang him about publishing this piece, Bardeau said he has since demanded Binance would stop issuing students with their attendance certificates by NFT that could only be obtained on Binance digital wallets.

“Our mission was to make people understand and like blockchain and all its use cases beyond crypto,” he said. “Not mixing genres and hard-selling.” The next day, promotional content about the Binance partnership had disappeared from Simplon’s online homepage.

France’s ministry of finance said: “The French government’s position remains very clear: regulation must apply with strength to Binance just like it must apply to all other financial entities while supervisors; and law enforcement if need, are charged with the enforcement of this regulation”.

The French ministry of labour, employment and economic inclusion has been asked for comment. The AMF declined to comment.

Thierry Philipponnat, who sat on the board of the AMF at the time of Binance’s registration, said Binance Charity’s education initiative could be the subject of legal wrangling in the future.

“One thing is certain: the [AMF crypto registration regime] does not allow direct solicitation of customers,” he said. “I imagine that the practices [described] could give rise to a fine debate between lawyers as to whether or not they should be considered as marketing.”