France set to regulate ICOs
Domicile Dessertine, AMF
Crypto assets have been under the spotlight in France in recent months. Last October, the Autorité des Marches Financiers (AMF) launched a public consultation on the regulation of initial coin offerings (ICOs) in a bid to encourage the development of a new type of fundraising in the country.
The French government’s move towards ICOs contrasts sharply with the stance taken by countries such as China, Russia or even the US. The US Secretary of the Treasury, Steve Mnuchin, said in January this year that he and other regulators were looking into the possibility that cryptocurrency could be used in money-laundering activities due to the anonymous nature of the transactions.
The French Treasury acknowledges the risk but argues that this situation justifies the need for a regulatory framework.
“ICOs can be very risky for investors and with no regulatory oversight, it’s true that these types of fundraising can lead to money-laundering,” a source at the Treasury says. “That being said, we must also admit that ICOs are a major source of fundraising for start-ups and SMEs. A lack of regulation could be detrimental for both the issuers who would have no other option but to launch their project in a country that already has a regulation in place and for the investors who could be subject to fraud.”
The consultation launched by the AMF aims to bring more clarity over the way France can better regulate ICOs.
The AMF lined up three options in the consultation paper. First, the regulator suggested to produce some best practices for market players to comply with. Second, the AMF proposed to extend the scope of the existing regulation to treat ICOs as public offerings of securities. Third, the AMF proposed to develop a specific and tailored regulatory model with the launch of a licence.
“For the third solution, we had two separate options,” says Domitille Dessertine, a member of the Fintech, Innovation and Competitiveness team at the AMF. “The first one was to make this new regulation mandatory, meaning that all those new players who wouldn’t have received a regulatory approval would not be able to operate in France. The second solution consisted in making it optional, meaning that all the issuers who want to obtain a regulatory approval will be able do so provided that they meet a certain number of pre-defined requirements.”
The AMF received 82 responses in total. The majority of respondents opted for a specific and tailored regulatory framework and for this new regulation to be made optional.
The results of the consultation are now in the hands of the French Treasury.
The Treasury confirmed to FinTech Futures that a licence will be created to insure that the issuer meet some criteria such as the full disclosure of the project related to the ICO and its advancement and the role of escrow agent to hold the assets.
However, the Treasury warns that the licence will not guarantee the success of the ICOs. “This will be the sole responsibility of the investor,” the source at the Treasury adds.
The Treasury goes on to say that the AMF will be in charge of drafting a list of issuers operating with the licence and will update it regularly.
The details over the licensing will be part of the new action plan for business growth and transformation Act the French government is currently putting together and which should be introduced before the end of the year.
By Cécile Sourbes, editorial contributor to FinTech Futures
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