A Review of France’s Crypto Rules Likely in April 2019

Wilfred Michael 

Wilfred Michael

News reporter

25 March 2019,
A Review of France’s Crypto Rules Likely in April 2019

In case you didn't know, France is set to become one of the first European countries to adopt regulations for the crypto industry following the steps of Malta, Belarus, and a few others.

According to LegalIco, the new rules defined for the crypto industry by regulators is reportedly under review by the French Parliament and could get approved as soon as April 2019.

In this article, we review the proposed regulations (Article 26 of the future PACTE law) for the French crypto industry.

Rules for Initial Coin Offerings (ICOs)

Under the newly proposed regulations, any entity who wishes to conduct an initial coin offering (ICO) would first prepare a document detailing all relevant information about the project and submit to the French Financial Market Authority (AMF).

Such a document will be written in a way that is not misleading, especially in the manner of obscuring the risks investors will be exposed to when they invest in the project by purchasing tokens.

The Role of the AMF

Upon receiving the application from the entity wishing to conduct an initial coin offering, the AMF would verify whether the proposed project and its team can deliver the promised end product.

The regulators will also ascertain:

  • the level of risk for investors

  • whether the project is a registered entity in France and

  • whether they made provisions for monitoring and safeguarding investor funds.

If a project satisfies all the metric defined by the AMF, then they would receive a visa (license) to conduct their initial coin offering.

Also, if at any time the project does not satisfy the conditions or guarantees contained in their initial document, the AMF can revoke their license, thereby canceling all ongoing promotions about their offering.

Rules for Digital Asset Service Providers

The French Parliament adopted new amendments to Article 26, with the purpose of defining standards for digital asset service providers.

Businesses that fall into this category include:

  • Custodians who store either cryptocurrency or private keys on behalf of third parties.

  • Merchants who facilitate buying and selling of cryptocurrencies for Cash.

  • Platforms that facilitate the sale of one cryptocurrency for another

  • Trading platforms

  • Investment advisers

  • Portfolio and investment managers

The proposed regulations state that cryptocurrency custodians and token issuers must register with the AMF and obtain a license.

Before issuing a license, the AMF will on its part ensure that the company's owners and shareholders have a good reputation and competency required for those who wish to provide such services.

Additionally, the company seeking approval would provide evidence of:

  • A professional insurance cover that is sufficient to mitigate any security, operational or fraud risks associated with operating their platform.

  • A system for managing conflict of interests

  • A secured computer system as well as internal security control systems.

Aside from the above, the AMF may assess shareholders who own up to 20% of the business voting rights or capital.

Rules for Crypto Asset Custodians

Crypto asset custodians (those who store private keys or digital assets) must agree with clients before providing any such services.

Also, they will:

  • provide a conservative policy

  • ensure that they are always able to return client's assets upon demand

  • separate their accounts from that of clients and

  • avoid tampering with client's private keys or digital assets unless they receive express permission to do so.

Rules for Token Issuers

Businesses under this purview will have to:

  • Set a fixed price for tokens as well as defining a pricing model.

  • Create a non-discriminatory commercial policy

  • Publish regular information about transaction volumes and prices.

  • Execute client's orders in real time based on current prices.

Rules for Exchanges and Trading Platforms

Cryptocurrency exchanges and trading platforms will abide by the following rules:

  • Creating operational rules for their platform and ensuring orderly negotiations

  • Publish details of orders  and transactions carried out on their platforms

  • Committing only their capital to the smooth running of the business as allowed by the AMF's limits.

Licensed Crypto Businesses in France will have Access to Banking Services

Interestingly, the rules for the French crypto industry addressed a common issue in different countries whereby local banks deny crypto-related businesses access to their services.

We recently reported an ongoing case between Brazilian-based crypto exchange Mercado Bitcoin and Santander Bank.

Under the new rules, banks are not mandated to provide services to crypto-related businesses.

However, they are urged to create “objective, non-discriminatory and proportionate rules” that allows them to cater for the needs of crypto-businesses licensed by the AMF noting that ‘these people should use these services efficiently and without hindrance.’

Final Words

France's decision to provide clear regulations for the crypto industry is not far fetched from the government's belief that the new industry could provide an additional income stream in the form of taxes and allow the nation to increase their leadership position in the tech space.

Hopefully, the new rules will also have yield mutual benefits for the local crypto ecosystem and serve as a springboard to massive growth in the near future.


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