France’s Financial Markets Authority considers its options for regulating initial coin offerings

By Claude-Étienne ArmingaudEmilie OberlisAlexandre BalducciSidney Lichtenstein and Alban Michou-Tognelli

The French Financial Markets Authority, the Autorité des Marchés Financiers (“AMF”), recently published a white paper requesting the views of stakeholders on the best means of regulating the fundraising activities based on cryptocurrencies and blockchain technology and is also launching a digital-asset research program called UNICORN (“Universal Node to ICO’s Research & Network”). In doing so, the AMF is following in the footsteps of the French Ministry of Finance, which published a draft document aimed at adapting the French legal framework to the use of blockchain technology on 19 September 2017 (see our coverage here).

The white paper focuses on initial coin offerings (“ICOs”) which are fundraising activities used to finance technology-based projects at an early stage of development. Participants to an ICO transaction receive tokens issued by the project initiator, in exchange for their investment in cryptocurrency or fiat currency. These tokens (a) have different characteristics depending on the transaction; (b) confer different rights to their owners; and (c) are intended for a technologically-oriented and informed audience that has a good understanding of (i) the nature of the project, (ii) the underlying technology, and (iii) the risks associated with the project.

The white paper also emphasizes that ICOs involve significant risks such as: absence of specific regulation; loss of capital; volatility or lack of a market; and money-laundering and scams.

Finally, the white paper lays out three possible options for regulating ICOs: (1) promote best practices without changing existing legislation; (2) extend the scope of existing texts to treat ICOs similar to public offerings of securities; and (3) propose ad hoc legislation adapted to ICOs.

Comments on the white paper must be sent to the AMF by 22 December 2017.

You may see our full article here.

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