The French Financial Markets Authority (AMF) published209 on October 22 a discussion paper regarding its analysis of the application of existing regulatory framework to ICOs and future regulatory options.
While most tokens present similarities with financial securities (equity or debt), they do not meet the required characteristics established in the financial markets code (Art. L211-1 CMF), and therefore should not be regulated as public offering of financial securities.
As ICOs are generally not intended to manage a portfolio of financial instruments and deposits on behalf of investors, it seems unlikely that ICO token investors could be regarded as an Undertaking for Collective Investment in Transferable Securities (UCITS). However, the AMF considers that some ICOs could be considered as an Alternative Investment Fund (AIF), to the extent that the invested capital is used according to a predefined investment policy.
Firms involved in ICOs are likely to fall within the scope of existing regulations on intermediaries in miscellaneous assets (L 550-1) as it relies on a loosely defined notion of assets: any resource having an economic value that can be appropriated.
The AMF opened a public consultation, inviting people to discuss three separate options:
1. To maintain the regulatory status quo and establish best practices: The current regulatory framework would not change. Depending on ICOs structure and tokens characteristics, they might fall within existing regulation with the expectation that it would be the rare. However a set of best practices, with no legal impact would be set up for new entrants. The AMF recommandations are on preparation, information and organisation of ICOs.
2. To regulate ICOs using the existing legal framework for prospectuses: The European regulation on the prospectus for public offerings (UE 2017/1129) set the content and procedures for this document. ICOs could be included in this legislation but it must be decided at the European level. Moreover the "visa" procedure, by which national authorities such as the AMF certify the document, are particularly cumbersome.
3A. To adopt a mandatory registration and authorisation regime, applicable to all ICOs available to the public in France: this ad hoc procedure would be similar to the prospectus regulation, taking into account particularities of ICOs such as the absence of legal entity, the community management of the project, the scientific and technical nature and the high uncertainty of financial gains.
3B. To adopt an optional registration and authorisation regime: ICOs could optionally register and obtain an authorisation similar to the one described above. Projects without the authorization would have to issue a warning to potential investors.
On February 22nd the AMF published a synthesis, implying a preference for the last option : an optional “light” visa. This regime is currently being discussed as part of broader law on economic of reforms (“Plan d’action pour la croissance et la transformation des entreprises”)