France’s AMF defends optional regulatory regime for crypto assets, ICOs

Robert Ophèle, chairman of France’s financial markets authority AMF, has voiced his support for an innovative approach towards the regulation of cryptos.

Mr Ophele noted that an innovative environment, such as the one associated with cryptos, requires an innovative regulatory approach. Importantly, the regimes under consideration in France to a large extent offer a degree on optionality, with an optional AMF visa/approval for initial coin offerings, and an optional Crypto Asset Service Provider license.

The French regulator said such an approach was appropriate for a number of reasons.

First, because currently the crypto-asset environment is developing to a large extent in a legal vacuum. For that matter, an optional regime may mark the first regulatory step in response to the legal uncertainty this environment presents.

Second, even if optional, such a regime will bring better investor protection since the investor will have the possibility to choose and prefer licensed entities. This marks a significant improvement when compared to the current situation. To some extent instead of relying mainly on black lists of dubious products and fraudulent intermediaries, the AMF is now leaning in favor of white lists of labelled products and licensed intermediaries, providing investors with an incentive to turn their attention to these.

Third, this environment is still very much nascent and the AMF admitted that it needs to gain a deeper understanding of how it is structured. An overly prescriptive framework could unduly harm the development of innovation. An optional regime leaves the environment time to structure, just as it leaves the authorities time to build their knowledge.

Finally, it would be most challenging to effectively enforce a mandatory regime on a purely national basis.

Let’s recall that the investor info center of the AMF received 2,261 enquiries about crypto-assets in the first 10 months of 2018. Whereas the regulator confirms that there are concerns about crypto fraud, in most the cases complaints concern fraudulent investments in cryptocurrencies rather initial coin offerings (ICOs). They remain a rather marginal method of financing, having generated EUR 19.4 billion since 2014. France represents a minor part of this market, with 15 ICOs having generated EUR 89 million.

The French regulator noted back then that meager 6% of the tokens display characteristics of financial instruments. This presents a major challenge for regulating crypto-related activities.