The “Loi Pacte” was approved by the French government earlier this year. the new law included multiple policy moves designed to improve the overall competitiveness of the French economy. As part of the legislation, France created bespoke rules for initial coin offerings.
Under French law, a security is a security and, beyond some adjustments, digital securities are guided under existing rules. A year ago, the French Government issued a decree adjusting for the utilization of blockchain for securities. The decree made France the first European country to take such a step. While not specifically mentioning blockchain or distributed ledger technology, the language aligned with the intent to facilitate securities tokens.
The Lot Pacte created rules for digital assets which are not securities. Earlier this year, Crowdfund Insider spoke with Attorney Thibault Verbiest who provided his perspective on the emerging ICO regime.
Uniquely, an issuer in France does not need to receive approval by the Autorité des Marchés (AMF) – the lead securities regulator in France. But an issuer may not promote an ICO if has not gone through a review process by the AMF. To quote the AMF:
Optional licensing for digital asset service providers – If they wish, digital asset service providers (PSAN) may be approved and placed under the supervision of the AMF.
The AMF will have the power to monitor the ICOs that have received its visa and to supervise the approved service providers. In the event of non-compliance with the rules, the AMF may impose sanctions against ICO issuers and authorized service providers.
Soliciting, patronage and sponsorship will be prohibited to non-subject ICOs and unauthorized service providers. Advertising will remain authorized.
As a result, the AMF may publish a “blacklist” of ICOs and digital asset service providers that do not comply with the regulations.
Effectively, if you cannot promote an offering there is little hope of generating any interest. Additionally, if an offering has not been reviewed by the AMF – who in their right mind would participate in such an offering?
Issuers that have had their white paper reviewed by the AMF, and the offering is deemed worthy, the ICO is then white-listed and a notice is posted on the AMF website.
But while CI has heard that multiple projects have been submitted, as of today, none of these aspiring ICOs have been posted on the AMF white list. The white list is empty.
Simultaneously, the AMF blacklist is a busy section of the regulator’s site. The French regulator publicly adds names to the list notifying the public of all sorts of nefarious websites attempting to fleece the unsuspecting of their money including “crypto-active.”
While it is not just bogus ICOs that are on the list, the AMF blacklist is a good example of the risk involved in backing any investment that sounds good but really isn’t. Just last week, the AMF posted a notice about a bogus investment crowdfunding platform claiming it was regulated when it was not.
Crowdfund Insider contacted Bilal el Alamy, CEO and founder of Equisafe for his point of view. El Alamy is in the thick of the blockchain sector as Equisafe is an issuer of digital securities – most recently a tokenized real estate investment that stands as a proof of concept for their securitization process. We asked El Alamy if he was aware of forthcoming, White-listed ICOs in France:
“The Decree for the PACTE law is very recent, the AMF has probably received plenty of submissions that, I’m sure, they are currently analysing,” said El Alamy. “What I see from the market is that they are a lot of projects that are doing an ICO for the wrong reason and as the AMF is publicly giving an « opinion », I guess they are really challenging the projects and the teams.”
El Alamy noted that this process is good but it takes a long time as there may be multiple meetings with AMF officials as they poor through the White Paper and complete due diligence on the aspiring issuers.
The other issue is that the initial coin offering market has lost a good amount of its lustre. The ICO market was hot when it was an easy path to fast money and speculation. Most cryptocurrencies issued during the heyday are worth far less than at the time of the offering. Like most startups, whether the concept has merit or not, these companies will fail.
But El Alamy says the ICO collapse, peppered with fraud, doesn’t mean there will not be any future “utility” type offerings:
“…the truth is, they aren’t many ICOs being done. But it’s coming … I know of some projects that are in the pipe, the first cohort should be announced by the beginning of next year,” El Alamy assured us.
Let’s see what the AMF approves after the first of the year and whether or not the rest of Europe will follow in France’s path.