21.06.2024

French Financial Regulator Suggests Europe-Wide Security Token Sandbox

The “Digital Lab” would run for three years, the watchdog said in a March 6 legal analysis, exempting projects from financial regulations like the MiFID and CSDR that AMF’s analysis deemed incompatible with the blockchain sector’s growth.

France’s Financial Markets Authority (AMF) has proposed that all of Europe adopt a regulatory sandbox to support the emerging security token industry.

“These frameworks were designed to frame centralized market infrastructures,» AMF President Robert Ophèle said in a speech. He explained that “they are not suited to the decentralized nature of the blockchain environment” and therefore render many projects almost assuredly unprofitable.

But Ophèle insisted that Europe could not just adopt new regulations for blockchain and security tokens overnight.

“We are faced with a ‘chicken and egg’ paradox”, Ophèle said. The space cannot develop under the current framework, but without documentation, new frameworks cannot evolve either.

A Digital Lab sandbox would give regulators both, Ophèle said. Authorities would closely monitor how these projects evolve when unshackled from Europe’s traditional markets regulation, collecting three years of feedback and data to shape the formation of new, more flexible regulations.

“As a regulatory authority, we need to understand these changes and ensure that our regulatory frameworks remain appropriate. These frameworks must make it possible to manage risks – to effectively protect users – without losing the benefit of innovations”, Ophèle said.

It remains to be seen how other continental financial regulators will react to AMF’s latest recommendation. The press offices for Germany’s, Italy’s, Austria’s, Ireland’s and Finland’s respective securities regulators did not immediately respond to requests for comment, and neither did the European Securities and Markets Authority, the top securities watchdog for the EU.

French Financial Watchdog Approves First ICO Under New ‘Visa’ Scheme

France’s Financial Markets Authority (AMF) announced Thursday it had approved an initial coin offering (ICO) for the first time.

The successful recipient of the AMF «ICO visa» – a cryptocurrency fundraising platform called French-ICO – met the minimum guarantees required by law, including a white paper investors could understand, according to a statement from the regulator.

ICO visas are a means to ensure sales do not bring investors undue risk. Applicants must show the AMF they have provided all relevant information about the sale, as well as the risks involved. Approval is not an endorsement for the company.

The regulator can only approve public offerings for utility tokens, and an applicant must be a registered entity in France. They must also have procedures for securing investor funds and comply with strict anti-money laundering (AML) requirements. Once approved, the ICO must take place within six months.

France passed one of the most comprehensive legal frameworks for cryptocurrencies earlier this year. Known as the PACTE law, it provides companies legal certainty in return for being regulated by the AMF. That includes a guaranteed bank account, as well as the option to host a token sale in the country using the ICO visa.

AMF approval further allows a company to market its sale and engage in promotional activities.

Registration is optional, however. Companies can still host an unregistered ICO in France but they are not allowed to promote the sale to potential investors.

Reuters reported in July that the watchdog was talking to three or four candidates for an ICO visa.

Although the news was announced Thursday, French-ICO received its visa on Tuesday. Scheduled to begin in March, the sale is capped at €1 million ($1.1 million), according to its website. The visa runs out on June 1, 2020.

The AMF has come down hard on crypto companies that have broken French law. The watchdog previously banned advertisements for cryptocurrency derivatives and, in March, blacklisted 15 cryptocurrency websites that it considered had unlawfully guaranteed high returns on investments.

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