FRANCE Law and Practice Contributed by: Sylvain Clavé and Germain Chaux, Clavé Avocat
which explicitly excludes financial instruments from its scope. Any platform offering such products in France must then hold a licence as a credit institution or an investment firm, and a simple CASP licence is insuf - ficient for this activity. 10.9 Decentralised Finance (DeFi) Many activities performed by decentralised finance (DeFi) protocols could be reclassified as regulated services under existing laws, such as decentralised exchanges (DEXs), which facilitate the exchange of crypto-assets. DeFi currently operates in a sort of regulatory “grey zone” in France and the EU, as it is not yet governed by a bespoke or comprehensive legal framework. While MiCAR provides a framework for centralised providers, it largely excludes services provided in a “fully decentralised manner without any intermediary”. Assessing whether a protocol is “fully decentralised” is one of the major challenges for regulators, as it determines whether or not MiCAR regulations apply. This analysis raises questions, particularly regarding the role of decentralised autonomous organisations (DAOs): regulators could struggle to identify a person to be held accountable regarding compliance require - ments. 10.10 Regulation of Funds Since 2019, the PACTE law allows professional specialised investment funds ( fonds professionnels spécialisés – FPSs) and professional private equity funds ( fonds professionnels de capital investissement – FPCIs) (with an allocation limited to 20% of their assets) to invest directly in crypto-assets, provided they are reserved for professional investors. From an operational point of view, any asset manager that intends to manage a fund investing in blockchain assets must obtain a licence extension from the AMF. This extension requires a modification of the asset manager’s programme of activity. The asset manager must also appoint a custodian to monitor assets and verify ownership, while the actual custody of private keys and the execution of trades must be handled by a registered or licensed DASP/CASP. Moreover, these asset managers are required to implement rigorous
internal policies to ensure that the assets are fairly valued. 10.11 Virtual Currencies Virtual currencies are a type of crypto-asset used as a means of exchange without necessarily representing a right on their issuers. In France and the EU, the regula - tory framework does not distinguish between “virtual currencies” (such as Bitcoin or Ether) and other block - chain assets, treating them under the unified umbrella category of digital assets (under the PACTE law in France) or crypto-assets (under MiCAR). 10.12 NFTs NFTs are excluded from the digital asset and crypto- asset scope, as MiCAR states in its Article 2 (3): “[t] his Regulation does not apply to crypto-assets that are unique and not fungible with other crypto-assets”. The AMF aligns with MiCAR and considers that NFTs are not digital assets unless they meet certain specific criteria. Regarding the determination of the fungible or non- fungible nature of a crypto-asset, Recital 11 of the Regulation specifies that fractional parts of a unique and non-fungible crypto-asset should not be consid - ered unique and non-fungible. Furthermore, the issuance of crypto-assets as NFTs in a large series or collection should be regarded as an indicator of their fungibility. Finally, the mere attri - bution of a unique identifier to a crypto-asset is not sufficient to classify it as unique and non-fungible. This approach is reinforced by ESMA, which promotes a “substance over form” and casuistic analysis. If an NFT, regarding its structure or the right it confers, functions as a financial instrument, it must be regu - lated as such. This means that if an NFT provides rights to future profits or capital appreciation, or rep - resents a claim on other assets, it essentially loses its exemption and falls under MiCAR or MiFID II. 10.13 Stablecoins Stablecoins are crypto-assets that are designed to maintain a stable value by reference to an underlying asset or a basket of assets (such as commodities or fiat currencies, which are issued by a central bank or
300 CHAMBERS.COM
Powered by FlippingBook