France’s AMF opens consultation into ICOs

Maria Nikolova

The French financial markets authority warns about the risks associated with ICOs and notes that at this point it cannot guarantee the safety of investments in such projects.

France’s financial markets authority AMF has added its voice to the growing chorus of concerns regarding initial coin offerings (ICOs). The French regulator today opened a consultation into ICOs, with most questions focused on the possible ways to regulate these offerings.

The consultation is open from October 26, 2017, to December 22, 2017, with comments to be sent to [email protected]

The French regulator notes the recent rapid developments in the area of blockchain technologies and the disruptive nature of these technologies and ICOs. But the watchdog warns of many risks associated with ICOs, including the fact that often the entities behind such offers are located overseas, where ICOs may be unregulated or prohibited, or that such entities conceal their corporate identities leaving them out of reach in case a problem emerges. Moreover, this innovative form of investment implies high risk of losses and investments are not guaranteed in any way. The risk of ICOs being used for money laundering is also present.

Concerning how ICOs may potentially be regulated in France, the AMF proposes a detailed analysis, which shows that tokens do not fall under the scope of the “securities” concept, which makes it hard to regulate them and leaves them in some grey area in terms of law.

The French regulator notes the various approaches by regulators across the globe with regard to ICOs – ranging from prohibitions in China and South Korea, and the more moderate stance of the financial regulators in the UK and Switzerland.

In September this year, the Financial Market Supervisory Authority (FINMA) of Switzerland said it was examining the booming segment of ICOs. FINMA also indicated that it was investigating a number of ICO cases in order to determine whether certain regulatory provisions have been breached.

FINMA stressed that the structure of ICOs varies markedly in each case. It also emphasized that ICOs are currently not governed by specific regulations, either globally or in Switzerland. Depending on how an ICO is structured, however, some parts of the procedure may already be covered by existing regulations, such as provisions on combating money laundering and terrorist financing, banking law provisions, and provisions on securities trading, the Swiss regulator said.

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