In this week’s blockchain news, French regulators have done the unimaginable. After more than a year of planning and working, they officially provided a clear direction for cryptocurrency companies seeking to access banking services and hold token sales. The surprising part was that they did so in a way that is decidedly pro-ICO.
By adopting the Action Plan for Business Growth and Transformation (PACTE), the French National Assembly kickstarted a pathway for ICOs and other crypto related startups. Once enacted, this law establishes a framework not only for token sales, but also for cross participation between crypto companies and the insurance and fund management industries.
- French Regulator says, “There are some business models that may not fit within a regulatory framework.”
- Banks will answer to regulators if they refuse services to a crypto company.
- France to offer crypto projects an optional visa regime.
- New law creates crossover opportunities between crypto and other industries.
- There’s lots of caveats and plenty of uncertainty as to how the new rules will actually play out. But it’s a fantastic beginning.
France pulls through for crypto businesses
As someone who’s been researching crypto regulations for a couple of years, I could barely believe my eyes when reading a recent CoinDesk article blockchain news out of France on crypto regulation. There were words I never thought I’d see coming from a financial regulator’s mouth:
“There are some business models that may not fit within a regulatory framework. I’m thinking of fully decentralized projects where you don’t even have an identified corporate issuer, where it’s really a community of people working together.” – French regulator, Domitille Dessertine
After that, they went on to describe an optional visa regime – music to a blockchain enthusiast’s ears. Essentially, crypto projects will be able to opt-in to be regulated. By doing so they are “guaranteed” a bank account. But they may also choose to operate without regulatory supervision, with a more limited service structure.
As usual, big blockchain news stories tend to lead us to ask a lot of questions. That’s because everything is cutting edge and being invented as we speak. Kudos to France for publicly solidifying their commitment to supporting FintTech companies, new crypto businesses, and the industries that support them.
“These are common sense rules. This regime will enable us to address this new issue with a proportionate framework that both protects investors and fosters innovation. We believe it will attract the good projects.”– Robert Ophèle, AMF’s chairman
However, there’s a lot that remains to be seen. There was quite a bit of hyperbole while the announcement only took up one page on the official website. We haven’t seen the implementation of this framework but we certainly look forward to it.
While we wait for that to get underway, let’s chew a little on what French officials said.
Main takeaways of this blockchain news
- Token issuers would need to be a legal entity in France – In fact, the announcement mentioned several times that France is open to other companies (hint hint) to register in their country.
- A system would be set up for safeguarding the assets – How far has this been thought through? Are they thinking of cold storage?
- The visa remains optional – That’s great, they even stated that raising funds through a token sale without the visa will still be legal. But there’s not a lot written here about how non-visa entities will operate. We know that their token sale can’t be public. But will they be able to have bank accounts at all? They most definitely won’t have the ‘banking guarantee’ afforded to regulated ICOs. While it’s great to hear forward minded blockchain news, there’s also some talk of the AMF keeping a blacklist of ICOs that are under-regulated. Additionally, there may be other restrictions on their marketing operations and ability to operate publicly.
- The AMF will publish the list of ICOs that have received its visa – Imagine that; ICOs kind of verified by the government, almost!
- The banks will have to answer to the government if they refuse services to crypto businesses – The banks, really? I’m glad the French people have spoken and their government officials listened, that is great. But I’d like to see what BNP Paribas and other big banks have to say about it.
“The relationship between the project and the bank remains contractual, but if the banks refuse then they will need to justify with us why they have refused to open a bank account.”AMF-France.org
The new rules
The rules outlined in the French regulatory statement lay the groundwork for service providers who want to work with blockchain startups. Beginning with insurance providers and hedge fund managers, these companies will also be subject to French ‘common sense’ rules. For instance, they’ll need to show their capacity for:
- Internal control procedures
- A strong IT system
- Transparency in their pricing policies
- Other rules may be specific to a particular industry.
The framework’s design is so that it encourages private equity and VC funds to enter the ICO token realm. Specifically, PACTE gives France’s specialized hedge funds a little more leeway when investing on behalf of life offices. The idea is to gradually infuse insurance funds with increasing exposure to cryptocurrency assets.
Is France the new Malta?
A lot of countries, like Australia and Switzerland, have been pushing forward with business based crypto regulations. Malta, long a stalwart of FinTech freedoms, also represents a sought after island paradise persona. In fact, a report came out this week with blockchain news out of Malta which was most welcome.
They, too, have issued a crypto regulation guidance. Even though they’ve long been a hub for expats and crypto lovers, Malta now has France right at its doorstep. The competition for the best country to hold a token sale is heating up!
The French authorities are hoping for a fully operational framework for ICOs to roll out in September of 2019. Soon after that, the intermediaries license for bridging crypto startups with financial services should take effect.
France’s Finance Minister, Bruno Le Maire, suggested at the Paris Blockchain Summit that France’s guidance be an example for the EU regarding cryptocurrency business structuring. According to the official website, between 20 and 30 crypto asset providers have already been in communication with the AMF regarding their project.