Laws Related to Token Sales and Blockchain

Token Sales (“ICOS”)

There is not a mature legal framework for token sales at this time. However, the French Treasury as well as the Financial Market Authority (“AMF”), France’s key regulatory agency responsible for token sales and related legal issues, are both currently in the process of establishing a legal and regulatory framework for token sales.

The French Treasury has suggested a legal framework, details of which can be found here. Generally speaking, the proposed legislation offers a definition of tokens as:

“intangible property representing, in numerical form, one or more rights, that can be issued, registered, conserved or transferred using a shared electronic registration mechanism that facilitates the identification, directly or indirectly, of the owner of said property.”

It also defines ICOs as offers in any way shape or form to sell tokens to the public (with the exception of offers only made to a small group of people). Moreover, issuers of an ICO project would have to notify buyers of the status of the project, what funds were used for, and if a secondary market for tokens has been established.

Under the French Treasury’s proposed legislative framework, AMF would be authorized to license and approve ICOs, and would:

• Examine ICO promotional materials for accuracy,
• Verify that issuers can competently track funds, and
• Verify that the issuer is a legal entity under French law, registered in France.

In October 2017, AMF launched an initiative to explore ICO regulation called UNICORN, Universal Node to ICO Research and Network, which would provide some degree of guidance to participating entrepreneurs and investors.

Blockchain

Near the end of 2017, France passed Ordinance No. 2017-1674 of 8 December 2017 on the use of a shared electronic recording device for the representation and transmission of financial securities (“DLT Order”), allowing the use of blockchain “distributed ledger technology” (“DLT”) in the issuance and trade of traditional securities, including unlisted stocks and bonds as well as mutual funds that do not fall under EU Law. The DLT Order does not have implications for the legal status of cryptocurrencies or blockchain-based securities tokens.

Sources

• Lexology

  A New Legislative Framework for ICOs in France

• Coindesk

  French Regulator Launches “UNICORN” ICO Support Project

• Ordinance No. 2017-1674 of 8 December 2017 on the use of a shared electronic recording device for the representation and transmission of financial securities