France Adopts New Cryptocurrency Regulation
The French government has adopted a financial sector bill that establishes a legal framework for cryptocurrency service providers and initial coin offerings. The bill includes both optional and mandatory licensing, and also specifies the types of funds that can invest in crypto assets.
Pacte Bill Adopted
France’s Financial Markets Authority, the Autorité des marchés financiers (AMF), published on Monday details of the newly adopted bill which regulates the country’s crypto industry. The final text of the Action Plan for Business Growth and Transformation (Pacte) law was adopted on April 11 at its final reading by the French Parliament. It establishes a legal framework for digital asset service providers and initial coin offerings (ICOs), as well as strengthens the powers of the AMF as the regulator of the crypto industry.
The bill was launched on Oct. 23, 2017, and presented to the council of ministers on June 18 last year after consultation with 38 union organizations and professional federations. It contains “70 articles along with regulatory and non-regulatory mechanisms, and tax measures that will be incorporated into the 2019 Finance bill,” the AMF detailed.
Optional Licensing for Crypto Service Providers
The Pacte bill provides the option for digital asset service providers to be licensed and placed under the supervision of the AMF. These include crypto custodial services, brokers and dealers offering the “purchase or sale of digital assets against legal tender or other digital assets,” and crypto exchange operators. In addition, crypto services such as remittance, asset management, advisory, and underwriting are also included. While obtaining a license is optional, the AMF elaborated:
Whether or not they choose to obtain the optional license, service providers who wish to provide digital asset custody services to third parties or to purchase/sell digital assets in exchange for legal tender are subject to mandatory registration with the AMF.
Legal Framework for ICOs
Similarly, the bill provides the option for ICO issuers to apply for approval from the AMF if they meet certain requirements. For example, the issuer must be legally incorporated or registered in France and provide adequate information about the token, the project, and the company. There must also be a system to monitor and safeguard the assets collected during the sale as well as AML and CFT measures in place.
The AMF clarified that “Until now, fundraising through the issuance of tokens not classified as financial instruments was not subject to any specific rules,” noting:
The raising of funds without AMF approval will continue to be legal in France. However, issuers who have not received the approval of the AMF will not be able to solicit the general public … The AMF will publish the list of ICOs that have received its approval.
Funds That Can Invest in Cryptocurrency
The bill also specifies two types of funds that are permitted to invest in digital assets. They are “professional specialised investment funds provided that they comply with the liquidity and valuation rules applicable to them” and “professional private equity investment funds subject to a limit of 20% of their assets,” the AMF described. Neither is subject to authorization by the AMF but must be declared to the regulator within one month of their creation.
Increased AMF Oversight
The Pacte bill also strengthens the AMF’s regulatory powers, including overseeing approved ICOs and supervising licensed crypto service providers. The AMF may also publish a blacklist of those that do not comply with the regulations and may block access to fraudulent websites offering crypto services. Noting its authority to sanction any entities for lack of compliance, the regulator emphasized:
ICOs that do not have approval and unlicensed service providers will be prohibited from solicitation, patronage and sponsorship activities. Advertising will remain authorised.
France Wants EU to Adopt Its Framework
Following the adoption of the Pacte bill, France reportedly intends to urge the EU to adopt the same regulatory framework for cryptocurrency, Reuters reported Monday. The French Finance Minister Bruno Le Maire was quoted as saying:
I will propose to my European partners that we set up a single regulatory framework on crypto-assets inspired by the French experience … Our model is the right one.
AMF Chairman Robert Ophèle commented on the new crypto regulation: “These are common sense rules. This regime will enable us to address this new issue with a proportionate framework that both protects investors and fosters innovation. We believe it will attract good projects.”
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