France’s newest ambition to become one of the leading blockchain countries was partly driven by Brexit in the hopes of attracting foreign investors to Paris. Today, cryptocurrencies and blockchain technology represents a new vibrant industry in France. Yet no consensus has emerged to say whether digital assets should be treated similarly to existing ones using current regulations or if a new system should be devised.
Brief history of crypto regulation in France
After garnering a suspicious stance towards cryptocurrencies by the AMF (Autorité des Marchés Financiers) with the blacklisting of crypto websites, France has recently changed its position toward digital currencies and ICOs. The AMF is the French authorized governmental authority drafting ICO regulations to complement the law and enforce the regulation and sanction of potential violations throughout France.
Recently, French politician Bruno Le Maire stated that the French blockchain and the crypto sectors had now full support from the government. The French Minister of Finance added that “France will not miss the Blockchain revolution”.
On January 15 ,2018 a working group headed by “Monsieur Bitcoin” Jean-Pierre Landau was created to help regulate the crypto ecosystem and has shown the desire of France to monitor cryptocurrencies closer than ever before.
To build a fraud-free and dynamic crypto environment that safeguards investors, France mentioned the necessity to professionalize the ICO space with new regulations and perhaps even rating agencies. The new legal framework being drawn by the AMF will address this matter in-depth.
July 5, 2018, Jean-Pierre Landau, stated it was unnecessary for France to regulate Bitcoin and other cryptocurrencies. Earlier this year, the French civil servant’s virulent critics toward Bitcoin were received poorly by the Fintech industry. However, today some new regulations are shining through to support the emerging world of cryptocurrencies in Europe and France.
Where is France heading in regards to crypto regulations?
France has shown a growing interest for cryptocurrencies and ICOs (or Initial Coin Offerings) a form of crowdfunding with the issuance of tokens for funds raised that are used to launch innovative crypto projects.
On April 26, 2018 a new French regulation appeared for cryptocurrency taxation favoring investors with a flat tax rate of 19 percent down from a heftier 45 percent. This followed a new classification of BTC as “movable property” by the Council of State.
The blockchain space is still untested in France but the creation of the working group and the new taxation of Bitcoin provides a fresh and progressive perspective.
The New ICO framework
Today, France belongs to the top 10 ICO countries in the world representing 2.10% of global ICO projects, which is behind the likes of the US and the UK who account for more than 15% and 10% respectively.
France is currently discussing a new ICO framework under the PACTE law to be adopted by September 2018 to foster ICOs to protect purchasers, and to eliminate risks faced in unregulated crypto markets such as money laundering, fraud, and scams.
The new ICO framework proposed by the French Treasury governed by the AMF will see a new section added in the French Monetary and Financial Code to describe tokens and define the rules of conduct for ICOs.
Under this framework, the AMF will look to publish a whitelist of legitimate ICOs and exchanges as a proof of reliability for investors and user alike. This whitelist will include projects and exchanges that have applied to be placed on the list and who have then been consequently vetted thoroughly by the AMF. An “ICO Visa” will be available for projects to apply for that is coupled with KYC accreditation and approves crypto projects to carry out an ICO.
The law firm Kramer Levin summarized the forthcoming legislation:
“The proposed legislation would introduce a new chapter to Book V, Title V of the French Monetary and Financial Code, or CMF, which will be renamed “Intermediaries in Miscellaneous Property and Token Issuers.” Chapter 2 of Title V will be titled “Token Issuers” and will detail the rules applicable to ICOs in articles L. 550–6 et seq.
Chapter 2 provides a definition of tokens, indicating that a token is intangible property representing, in numerical form, one or more rights that can be issued, registered, conserved or transferred using a shared electronic registration mechanism that facilitates the identification, directly or indirectly, of the owner of said property. It also defines an ICO as any offer to the public, in any shape or form, to purchase tokens. However, it excludes offers made to a small number of buyers. Under the proposed legislation, the issuer should notify token buyers of the status of the project the ICO funds were used to finance, and of the establishment of any secondary market for the tokens.”
Under the new framework, project’s white papers will need to summarize the information surrounding their ICO following a certain set of guidelines. A description of the project related to the ICO and the rights conferred by the token will need to be clearly outlined along with the legislative court in any cases of dispute and the economic purposes of the funds collected in the ICO.
All white papers will then be submitted to the AMF to obtain a “visa” to launch their ICO. Only French legal entities seeking to undertake an ICO will be required to register in France as the visa is aimed toward French issuers only.
The future of ICOs in France is bright
Fostered by a new European initiative to protect countries from money laundering, the French nation will update its legislation toward cryptocurrencies by January 2020. The AMLD5, Anti Money Laundering 5, has come to effect since July 2018, and requires European countries to extend their scope toward cryptocurrency exchange platforms.
French banks are also working to offer eligible crypto entities a similar status to what would be known as a “broker dealer” status within the US, and eligible entities would be called “prestataire de services de banque”.
With the new framework aimed at regulating ICOs, the accounting and taxation of crypto assets on companies still currently remain unclear in France as in many other nation states. If the AMF approves the launch of ICOs as stated above, the taxation of crypto assets and how that will all be managed is yet to be defined. On top of this, the AMF has stated that advertisements of financial products around crypto assets are prohibited via electronic means.
Whether France will become a new crypto haven is yet to be seen however, within less than a year, the country has shown a positive growing attitude toward cryptocurrencies and ICOs overall.
With a new regulation framework in place to launch ICOs governed by the AMF and with the willingness of the government to make France a blockchain friendly destination, the crypto revolution is clearly en route within the French nation.