Among different developed countries in the world, the PACTE approach in France that regulates crypto and blockchain companies can be described as a significant step.
The new crypto law in France
In probably the most striking of examples, the regulatory framework which is drafted by Autorité des Marchés Financiers or AMF, which is the overseer of the financial market of the country, has the purpose of removing a longstanding point of contention which is faced by startups: banking relationships.
Under the same framework, the firms which opt to be regulated are also guaranteed a bank account. This is quite a long way from the United States, where the warnings of regulators about reputation risk discouraged the banks from providing deposit accounts to the digital currency businesses.
According to the head of the fintech, competitiveness, and innovation division at AMF, named Domitille Dessertine, reliable feedback, which comes from cryptocurrency players on the need for adequate banking, has been matched by firm consensus from the authorities in France.
The government of France, together with its legislators, was quite supportive of this particular right and entitlement to create a bank account as long as a person is regulated, according to Dessertine, who was shepherding the new rules over the last two years and so.
Under this new law, the burden is actually on the banks to explain why they will not serve startups, and she told that the relationships between the bank and the project remain contractual, but if the banks decline then they are not going to need to justify with them why they refused to open a bank account.
She also said that a parallel could have also been drawn with crowdfunding several years ago, where the banks were reluctant to open individual accounts for such platforms as money has been coming from the internet. But nowadays, this works quite good, and all types of banks, small and large, are going to be the subjects to the new provision.
However, the new requirement is only a part of the wide-ranging blockchain bill which was adopted at its final reading on the 11th of April, in the French National Assembly.
One part of PACTE Law, which is the plan of the government to create a new legal environment more growth-favorable of medium-sized and small enterprises, the bill even offers purveyors of ICOs or initial coin offerings and digital asset service providers too, the option to attain a “visa” to operate in France.
One partner at the law firm called Simmons & Simmons in Paris, named Emilien Bernard-Alzias pointed out that the parliament of France and especially its so-called crypto deputies wanted to make like much easier for crypto entrepreneurs for some period.
He said that right before the PACTE law, this has been a struggle for businesses related to cryptocurrency to open a bank account with a French bank. However, now the banks of France which refuse this are going to have to explain why they declined before the regulators of France, and he is sure that they are going to avoid having such discussions with regulators.
The new regulations are not designed to control and limit
The enthusiasm for the new crypto rules of France was at its highest levels, and it was apparent. The French Finance Minister, named Bruno Le Maire, during the Paris Blockchain Summit that happened last week, proposed that the EU use the bill as a model to set up regulatory frameworks on crypto assets which are inspired by the experience of France.
While the formal application process for the firms to gain the optional certification in France is not going to open until after the summer, there was already plenty of interest, according to Dessertine, who also said that 20 to 30 digital asset service providers, which include large, as well as small exchanges, were in touch already.
She explained that the framework is going to be operational after the publication of the implementing decreases that are going to occur over the following several months. She said that they hope that this is going to be enacted by May, or at least by June. They also foresee the application process as operational for ICOs by September, and the licenses they expect are going to be optional by this year, or even earlier.
The regulator of France was even careful about making the crypto visa entirely optional, in order not to cramp innovation in the fast-moving primary space, according to Dessertine.
Bernard-Alzias echoed a statement, pointing out that the new regulations aren’t designed to limit or to control, but they are to attract. He said that neither PACTE law nor the AMF wants to force people to seek one of the optional licenses, but if crypto-related firms want to take advantage of the optional licenses to gain more clients or partners, and appear more reliable, they could.
Societe Generale issued a token on the public ETH blockchain
Another quite notable change is going to permit the $2.5 trillion worth of insurance funds of France to take on more exposure to the crypto assets. PACTE law even allows the equivalent of hedge funds of France – which are specialized professional funds or FPSs – greater freedom, regarding the investing on behalf of life offices.
Maybe preparing to test the waters, the subsidiary of the French financial colossus called Societe Generale, recently issued a covered bond in the form of a token which was released on the public Ethereum blockchain.
Even though Societe Generale was the only investor in the issuance, it is on the same levels with some other covered bonds. The publication of Societe Generale took advantage of the 2017 French decree which recognized blockchain as the sound recording system for securities.
These new rules will even encourage the French private equity or VC funds to involve themselves more in ICO tokens, permitting them to invest in crypto assets more than 20% of their assets under management or AUM.
France is dramatically different from the United States, when it comes to the approach to initial coin offerings, as the definition of a security in the U.S. is quite broader to capture a lot of things. The chairman of SEC or Securities and Exchange Commission, named Jay Clayton, said that every ICO he has seen was security.
Contrary to the U.S. definition, the French one of security is narrow, and it means either a clearly defined financial and derivative contract, or also an investment such as a stock, unit share, or bond of a fund. Dessertine concluded that to them, most of the tokens which have been issued by ICOs, as well as cryptos themselves, don’t fall within their definition of a security.