In brief...
The French PACTE law has created a new legal
framework for digital assets (actifs numériques)
including, but not limited, to assets recorded in, and
transferred through distributed ledger technology
or blockchain.
After becoming one of the first countries to
authorize the registration and transfer of unlisted
securities using blockchain technology, France has
adopted an innovative legal framework on law on
Business Growth and Transformation, the so-called
PACTE Law, governing initial coin offerings (ICOs),
digital assets (actifs numériques) and digital assets
services providers (DASPs or PSAN, prestataires de
services sur actifs numériques) with the aim of being
at the forefront of the blockchain technology.
The PACTE law of 22 May 2019 allows entities, under
certain conditions, to issue digital assets that may grant
certain rights to customers (excluding shareholder
rights such as voting rights or dividends). Digital assets
include tokens (except those qualifying as financial
instruments) and digitally registered assets, including
cryptocurrencies, that are accepted as a means of
exchange that can be transferred, stored or exchanged
electronically through distributed ledger technology
(DLT or blockchain).
“ The definition of digital assets
is very broad and not limited
to ICO tokens and virtual
currencies (as defined under
European law) and potentially
extends to tokens related
to other industries (retail,
transportation, healthcare,
media, etc.).”
The provision of certain services on such digital
assets – listed in article L. 54 10 2 and define in
article D. 54 10 1 of the French monetary and
financial code – triggers, depending on the type of
service, either a mandatory or an optional license
with the French authorities (Autorité des marchés
financiers, AMF and Autorité de contrôle prudentielle
et de resolution, ACPR) as DASPs that is limited to
the French territory (ie services on digital assets do
not benefit from any passport within the EU/EEA).
DASPs providing the service of digital asset custody
or purchase/sale of digital assets in exchange for
legal tender are subject to mandatory registration
with the AMF. Conversely, DASPs only providing other services on digital assets (eg operation of a digital
assets trading platform, purchase/sale of digital assets
against other digital assets, reception and transmission
of orders or placement on digital assets) may apply
for an optional license, subject to compliance with
a set of rules (internal control procedures, resilient
IT system, transparent pricing policy, etc.).
“ Public offering of tokens
is subject to specific rules
also including an optional
registration (visa) with the AMF
requiring the drafting (in English
or French) of a “white paper”
made available to investors.”
Thus, companies wishing to obtain a visa must issue
such information document. The visa attests that the
AMF has verified the offer and is valid for six months.
It only applies to the particular ICO on which it relates
to. During such period, the AMF may withdraw the
visa if the offer no longer complies with the information
document. If the visa is not a condition for the validity
of the token issuance, its absence notably limits the
possibilities of marketing, solicitation, canvassing
or advertising.
The PACTE Law further entitles professional specialized
investment funds and professional private equity
investment funds to invest in digital assets, subject to
specific conditions and limits.
It is also questionable how such French regime
should be combined with other types of instruments
potentially simultaneously applicable such as electronic
money and digital payments (which are regulated
at the EU and not at a national level in France).
This type of issue should be considered carefully
and analyzed on a case-by-case basis when building
a new platform of digital assets or creating a new
digital assets product issued or distributed in France
(or having connection with France). Further guidance
is expected on this matter, pending EU regulation
notably on crypto assets and cryptocurrencies.
Finally, potential conflict of law rules should also be
analysed carefully considering the lack of French
specific conflict of law rule and the complexity of
applying general international law principles related to
conflict of laws to tokens and blockchains (in particular
open blockchain). A legal instrument providing for
a clear conflict of law is critical to the development
of blockchains both at the level of the EU and more
generally, at a United Nations or international level.