FRANCE Law and Practice Contributed by: Hubert de Vauplane and Hugo Bordet, Morgan Lewis & Bockius LLP
provide the service of exchanging digital assets for other digital assets, which requires registra - tion with the AMF. Platforms that allow users to earn interest on deposits of crypto-assets and to borrow crypto-assets, such as Aave, could potentially fall under the regulation of banking operations, although that regulation has been made to apply to the use of “funds” (ie, legal currency). It appears that the DASP regime is not adapted to truly decentralised platforms with decentral - ised governance. The regime was designed to regulate platforms operated by a centralised entity. It is possible that regulators will struggle to identify the persons responsible for the opera - tion of these platforms, and may not, in fact, be able to enforce the regulation. MiCAR does not aim to regulate DeFi either, although it mandates the European Commission to prepare a report in the coming years to assess whether a tailor-made regime should be creat - ed for DeFi. In May 2024, in light of the use of decentralised autonomous organisations (DAOs) by DeFi protocols, the HCJP published a report on the recognition of DAOs under French law. The report proposed a legal definition of DAOs, along with their legal and tax treatment, but this presently remains undetermined. In 2023, the AMF published a discussion paper on DeFi, aimed at exploring best practices and potential developments in the regulation of the sector. Similarly, the ACPR highlighted the need to develop an appropriate regulatory response to DeFi, taking into account its innovative nature and the risks it generates. Furthermore, in January 2024, a working group on the certification of smart contracts, led by the ACPR and the AMF, published a report pro -
posing regulatory pathways for the oversight of smart contract certification, within the context of an examination of existing practices. The report concluded that specific measures should be taken to ensure the security and validity of smart contracts within a clear legal framework. In this context, France is positioning itself as a driving force in the development of European regulation regarding DeFi. 10.10Regulation of Funds French alternative asset manager Tobam launched the first European cryptocurrency fund, the Tobam Bitcoin Fund, in November 2017. However, this fund was not licensed by the AMF, as cryptocurrencies do not fit into any existing category of the regulatory regime appli - cable to asset managers. French law, as amended by the PACTE Act, now allows professional specialised investment funds ( fonds professionnels spécialisés , FPSs) and specialised private equity funds ( fonds pro- fessionnels de capital-investissement , FPCIs) to purchase digital assets registered in a shared electronic recording system, ie, a blockchain. Only professional investors are able to invest in such FPSs or FPCIs. Napoleon Asset Manage - ment, a regulated asset manager specialised in crypto-assets, launched the first regulated cryp - to-asset fund in December 2019 (even though this fund does not hold crypto-assets directly but rather invests in bitcoin derivatives listed on the CME). Melanion Capital also launched a fund in 2021 that seeks to replicate bitcoin’s price by invest - ing only in listed securities of companies that operate in the Bitcoin sector.
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