Clifford Chance

Following the European Commission's public consultation on the development of a European framework for crypto-assets markets, the AMF and the ACPR/Banque de France published their responses on 7 April 2020.

The consultation addressed various issues, including:

• the legal qualification and classification of crypto-assets; 
• the regulation of crypto-assets which do not fall within the scope of existing European regulations; 
• how to deal with cross-cutting issues such as market integrity and money laundering and terrorist financing; and
• the applicability of current European regulations, such as MiFID, Prospectus Regulation or AIFM Directive, to crypto-assets qualifying as financial instruments (i.e. security tokens).

The AMF and ACPR/Banque de France responses are focused on the four main points summarised below.

Legal qualification and classification

The AMF and the ACPR/Banque de France are in favour of a classification of crypto-assets at EU level, mainly distinguishing between crypto-assets that qualify as financial instruments and those that do not, and distinguishing between crypto-assets that are qualified as electronic money and those which do not.  As such, the AMF insists that the interpretations of the concept of financial instrument should be harmonised between the Member States of the EU.

Furthermore, the AMF, as well as the ACPR/Banque de France, believe that global stablecoins should be subject to a clear legal characterisation and classification, with a specific mandatory treatment, as these could potentially affect financial stability by increasing fragilities in the conventional domestic currency financial sector and facilitating the cross-border transmission of shocks, and in the end, affect the real economy in multiple countries.

Regulatory regime

The AMF supports the development at the European level of a new regime for crypto-assets that are not financial instruments, comprising mandatory components (for instance AML-CFT and fit and proper) and optional components, using as an example the French PACTE law, which provides for a general optional license for digital assets service providers (DASPs), but for a mandatory registration if the intermediary provides digital asset custody services or buying or selling digital assets for legal tender services in France.

The ACPR/Banque de France takes a different stance on the matter by supporting the creation at the European level of a dedicated regulatory regime, composed only of adequate mandatory requirements, adapted to each different category of tokens, in order to avoid the emergence of different regulatory regimes within the European internal market.

Creation of a "Digital Lab"

The AMF suggests creating a "Digital Lab" at the European level to test new projects in the field of security tokens. Thanks to such Digital Lab, certain market participants would be provided regulatory exemptions, without modifying all European regulations, which could take place at a later stage, once the ecosystem has matured and the regulatory obstacles identified by the market participants are overcome. The AMF believes that this project should be coordinated by ESMA for crypto-assets that qualify as financial instruments.

However, the ACPR/Banque de France does not follow the same approach as it considers that this could lead to legal uncertainty and legal and operational risks. More specifically, it is the ACPR/Banque de France opinion that experimenting the settlement of listed securities with commercial bank money on a blockchain would disregard the Principles for Financial Market Infrastructures and the Central Securities Depositories Regulation (CSDR).

Settlement and delivery

According to the AMF and to the ACPR/Banque de France, the development of security token platforms providing settlement and delivery entirely on the blockchain does not seem possible in the current state of the legislation; a legislative adaptation of the CSDR seems necessary to allow settlement in cryptocurrency, unless an interbank settlement asset in central bank money is created. Indeed, the ACPR/Banque de France underlines the importance of using central bank money as settlement asset for interbank exchanges.

Sophie Péligry contributed to the writing of this article.