FRANCE Law and Practice Contributed by: Hubert de Vauplane and Hugo Bordet, Morgan Lewis & Bockius LLP
In 2022, Arquant Capital launched two funds that invest directly in bitcoin (Arquant Dynamic BTC) or ether (Arquant Dynamic ETH). The expo - sure to crypto-assets that are held directly can vary between 0% and 100% in order to reduce volatility. In October 2024, the first sub-governor of the BdF emphasised in his speech during the con - ference titled “What Future for the World of Cryp- to-Assets?” that it is still premature to discuss whether there is any systemic risk capable of affecting financial stability with respect to spot Bitcoin index funds, due to their limited signifi - cance. Indeed, as of January 2024, spot Bitcoin index funds had raised USD15 billion since their market launch, while the market value of stable - coins stood at USD164 billion. 10.11Virtual Currencies The regime established by the PACTE Act and more recently by MiCAR does not treat crypto - currencies differently from other “crypto-assets” . Similarly, Regulation No 2018-07 of the ANC considers cryptocurrencies, such as bitcoin or ether, as “tokens” for accounting purposes. In any case, there is no plan to give certain promi - nent cryptocurrencies any preferential legal treatment, such as acknowledging their use as money or as a medium of exchange. In a decision of 26 February 2020, the Nan - terre Commercial Court ruled that a bitcoin loan agreement can be governed by the general rules applicable to loans of non-monetary assets. This ruling was deemed controversial since it assumed that bitcoin (and thus, most digital assets) is fungible. Non-binding documentation the AMF also acknowledges the existence of digital asset lending, although it does state clearly whether
such activity is regulated under the regulation of digital assets or that of payment services or credit operations. Overall, regulators and legislators have mainly expressed their interest in utility tokens and the use of ICOs as a new method of financing start-ups and SMEs. Cryptocurrencies, on the other hand, are still treated with suspicion, and it remains a priority of the legislature to prevent their use in money-laundering schemes. 10.12Non-Fungible Tokens (NFTs) MiCAR provides a definition of NFTs, even though they are excluded from its scope: “Cryp- to-assets that are unique and not fungible with other crypto-assets, including digital art and collectibles, whose value is attributable to each crypto-asset’s unique characteristics and the utility it gives to the token holder.” Under French law, it is unclear whether they would qualify as digital assets or according to the underlying item (if any). NFTs are very diverse and have many use cases, making it difficult to apply a unified regime based on the classifica - tion of the underlying item. In any case, what is at stake with the classifi - cation of NFTs is mainly their tax treatment. Under French law, if NFTs qualify as digital assets, exchanging them against other digital assets benefits from a tax exemption (at least for individuals). If their classification depends on the underlying, all transactions between digital assets and NFTs may be taxed. In May 2023, the French General Inspectorate of Finance ( Inspection générale des finances , IGF), an entity under the Ministry of the Economy and Finance, published a report on commercial- purpose crypto-assets. In this report, it notably
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