The fact that digital currency investments pose a risk via fraudulent schemes was made amply clear by France’s financial markets regulator Autorité des marchés financiers (AMF) in its annual financial industry risk assessment report titled “The 2018 Markets and Risk Outlook.” However, the AMF admitted that there was not much reliable data to pinpoint the risks associated with virtual asset investments.
As explained in its 105-page report, AMF has cracked its whip on unlawful binary options and online forex trading businesses, as well as investment diamonds and miscellaneous asset schemes. AMF was successful in regulating these by means of Sapin II Law, legislation that focuses on anticorruption, transparency and economic modernization, in force since June last year. However, the regulator pointed out that investment in digital currencies is not covered by this current legal framework, which restricts them from taking action on these new assets.
“[T]he end of 2017 was marked by the emergence of investment offers on crypto-assets, such as Bitcoin, suggesting that fraudulent players have been able to shift their focus to this trendy asset. Nevertheless, the current legal and regulatory framework is not adapted to these new products, which strongly constrains the AMF’s ability to act.”
Not Fully Competent
As a result, the annual report explained that the authorities were not competent enough to deal with the risks associated with the buying of any digital coins at this point. Despite the lack of regulatory obligations, the AMF has undertaken a complete legal analysis of virtual asset derivatives. This has driven the regulator to conclude that some types of investments in digital coins could be considered financial contracts. In such cases, the same regulation that is applicable to other financial instruments should also be applicable to digital assets.
Monetary and Financial Code
Aside from these, the regulator believes that these virtual asset investments should be subjected to the country’s Monetary and Financial Code. Said Code takes care of issues in respect of good conduct, approvals, and advertising bans.
Existing laws and regulations in respect of financial markets in France do not classify cryptocurrency under financial instruments. Nonetheless, AMF is keen to review any advertising materials, especially when it refers to “buy-back option” or “the promise of a return” before approving them. At the same time, the country is also working on drafting regulations in respect of initial coin offerings since it does not want to stifle innovation.