Apr 2024

France

Law Over Borders Comparative Guide:

Cryptoassets

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1 . Are cryptoassets (including, for example, cryptocurrencies, stablecoins and non-fungible tokens) defined and, if so, what are the major elements?

The Plan d'action pour la croissance et la transformation des entreprises (Action plan for the growth and transformation of enterprises) was enacted on May 22, 2019 (PACTE Act). It defines digital assets in two Articles of the French Monetary and Financial Code (MFC). 

The first Article (Article L. 54-10-1, section 2, of the MFC) defines non-monetary tokens, and the second Article (Article L. 552-2 of the MFC) defines so-called “non-monetary tokens”. 

Article L. 54-10-1 of the MFC states that digital assets include:

“1° The tokens mentioned in Article L. 552-2 of the MFC, excluding those that meet the characteristics of the financial instruments mentioned in Article L. 211-1 of the MFC and the savings bonds mentioned in Article L. 223-1 of the MFC;

2° Any digital representation of value which is not issued or guaranteed by a central bank or public authority, which is not necessarily attached to a legal tender and which does not have the legal status of a currency, but which is accepted by natural or legal persons as a means of exchange and which can be transferred, stored or exchanged electronically”.

The definition in Article L. 54-10-1, section 1, of the MFC (which refers to Article L. 552-2 of the MFC) makes a clear distinction between digital assets and securities. Indeed, this provision formally excludes tokens whose characteristics are those of transferable securities. 

Similarly, the definition given in Article L. 54-10-2, section 2, of the MFC excludes tokens from the definition of legal tender. Article L. 552-2 of the MFC states that “a token is any intangible asset representing, in digital form, one or more rights that can be issued, registered, stored or transferred by means of a shared electronic recording device enabling the identification, directly or indirectly, of the owner of said asset”. 

The two definitions in French law (Article L. 54-10-1, section 1 and Article L. 552-2 of the MFC) complement each other, and when examining a token, it is necessary to check whether its characteristics allow it to be classified according to one or the other definition. 

NFTs (non-fungible tokens) are not explicitly referred to in either definition. However, according to the Financial Markets Authority (Autorité des Marchés Financiers or AMF) doctrine, NFTs whose characteristics are those of a digital asset according to one or other of the definitions are then qualified according to these same definitions. NFTs that do not fit into either definition (notably NFTs relating to works of art) are not regulated, and their issue and transfer must follow the rules of ordinary intangible property law or intellectual property law, according to the “substance over the form” analysis. 

With the entry into application of the European Markets in Crypto-Assets Regulation (MiCA), these definitions will be removed from French law: only the MiCA definitions will apply. 

However, throughout the MiCA transition period (i.e. until June 30, 2026), the two French definitions will coexist with the European definitions. The French law is expected to provide clarity on how the digital assets regime under the PACTE Act and the cryptoassets regimes under the MiCA Regulation will be considered equivalent during the transition period, so that players regulated in France under the PACTE Act can continue to operate until the end of the transitional period. 

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2 . What are the major laws/regulations specifically related to cryptoassets?

France’s desire to become a major European crypto hub was made clear by its adoption of the PACTE Act. The PACTE Act established a regulatory framework applicable to Digital Asset Service Providers (DASPs) and Initial Coin Offerings (ICOs). Under the PACTE Act’s regulatory framework, a DASP is required to register with the AMF when it provides at least one, of the following four services:

  • custody of digital assets on behalf of third parties;
  • buying or selling digital assets in legal currency;
  • exchanging of digital assets for other digital assets; and
  • operation of a digital asset trading platform.

The illegal practice of any of the above-mentioned activities without appropriate, prior registration is punishable by two years’ imprisonment and a fine of EUR 30,000, pursuant to Articles L.54-10-2 and L.572-23 of the MFC.

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3 . How are different types of cryptoassets regulated?

As indicated in Question 1 above, French law makes a clear distinction between digital assets (monetary or utility-based) and securities. Under French law, tokens whose characteristics are substantially equivalent to those of a security or electronic money are considered as such. In terms of analysis, it is necessary to establish that the token does not qualify as a security (or e-money), and then assess whether it qualifies as a digital asset. If the token meets neither of these definitions, then it is not regulated and must follow the rules of common civil law. 

There is a project currently under discussion in the French Parliament which aims to define “monetizable digital tokens” used in online gaming (see Question 12). This definition is different from that of digital assets under French law or cryptoassets under European law, according to the MiCA Regulation. If this text is adopted, it will complement French law and coexist with the notion of cryptoassets in European law. 

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4 . Is there an authorisation/licensing regime applicable to cryptoasset issuers/providers/exchanges and, if so, what are the requirements?

The PACTE Act created a new category of regulated entities: DASPs (digital assets service providers). The definition of digital assets covers ICO tokens as well as other types of cryptoassets. The services related to digital assets include various kinds of traditional investment services, as soon as they are performed in relation to digital assets, such as: 

  • custody of digital assets or cryptographic private keys for third parties; 

  • purchase or sale of digital assets against legal currency (i.e., fiat); 

  • purchase or sale of digital assets against other digital assets; 

  • operation of a digital assets trading platform; and 

  • various other services related to digital assets: 

    • receipt and transmission of orders on behalf of third parties; 

    • asset management; 

    • investment advice related to digital assets; 

    • underwriting; and 

    • placing with or without a firm commitment.

This framework is also partially optional. Any entity may apply for a DASP licence to provide the above-mentioned services. Licensed DASPs are subject to a set of obligations which are quite similar to those of investment services providers. On the other hand, providing the following services only requires a DASP registration (not a licence) with the AMF:

  • custody services;
  • the purchase or sale of digital assets against legal currency; and,
  • (since the order 2020-1544 of December 9, 2020) the purchase or sale of digital assets against other digital assets and the operation of a digital assets trading platform.

The law of March 9, 2023 created a “reinforced registration” regime from January 1, 2024, pending the entry into force of the MiCA Regulation. This reinforced registration is identical to a DASP licence application, with the difference that there is no capital requirement (and specific obligations for services 2°, 3° and 4°). For the rest, the content of the requirements is identical, notably in terms of risk control, governance, cyber security and IT security, market abuse monitoring and, of course, the implementation of anti-money laundering (AML) procedures and processes. As of July 1, 2023, it is no longer possible to obtain a “simple registration” (that is, a registration covering AML aspects only).

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5 . Is the promotion of cryptoassets to consumers or investors regulated and, if so, how?

There is no specific consumer protection provision for cryptoassets in French law but cryptoasset investors are considered consumers under French consumer law and French law strictly regulates the advertising and marketing of digital asset activities. 

Direct solicitation (cold calls or cold emails). A non-French regulated entity may not use marketing techniques unless it obtains a DASP licence. This restriction would apply to any direct solicitation of a potential client. Without a DASP licence, a non-French regulated entity may not advertise its services through an electronic advert which, “directly or indirectly, invites the person to fill in a contact form in order to receive additional information from the advertiser (or to establish a relationship with the advertiser”. 

Sponsorship or patronage. Without a DASP licence, a non-French regulated entity may not act as a sponsor or a patron where such action would allow this entity to advertise, directly or indirectly, its services. Sponsorship involves the financing of an event, a product, or a person. There is a legal distinction between sponsorship (parrainage) and patronage (mécénat): a sponsorship is granted in exchange for some form of exposure, while patronage dictates that there is no repayment to the patron. 

Derivatives. Under French law, advertising electronically to potentially non-professional clients regarding investment services related to financial contracts (the generic name of regulated derivatives) is forbidden, when the financial contracts being advertised are not traded on a regulated market or multilateral trading facility, and satisfy one of the following conditions:

  • the maximum risk is not known at the time of the subscription;
  • the risk of loss is greater than the initial investment; or
  • the risk of loss compared to the potential corresponding profits is not reasonably intelligible given the specific nature of the financial contract.

Use of influencers. An Act dated June 9, 2023 defines and regulates the activities of influencers, including with respect to digital assets. Influencers are defined as people who, with remuneration or benefits in kind, “use their notoriety to publish” online “content aimed at promoting, directly or indirectly, goods, services or any cause whatsoever”. Only DASPs with registration, reinforced registration or AMF approval as well as approved ICOs issuers (pursuant to Article L. 552-3 of the MFC), may use influencers to carry out advertising. This means that DASPs that are not regulated in France cannot use influencers for the French market. Influencers who violate the prohibitions or obligations laid down by law risk imprisonment and fines (up to EUR 300,000 in some cases), as well as a ban on practising their profession.

Following the publication of this Act, the ARPP (Autorité de Régulation Professionnelle de la Publicité) created a “certificate of responsible influence” for influencers who want to have a qualitative label. This is a non-mandatory certificate. 

In addition, the CCSF (Comité Consultatif du Secteur Financier) issued a public Recommendation in October 2023 aimed at improving the protection of digital assets holders by strengthening information to be provided by DASPs to investors, highlighting in this information the risks of certain activities such as “staking”, and providing assistance with tax declarations linked to investments in digital assets. 

Similarly, in October 2023, the ARPP published a Recommendation to set the rules that advertising professionals must apply regarding advertising on digital assets. Although the norms published by the ARPP don’t have a binding effect, they have an influence on the market usages used by players.

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6 . What anti-money laundering requirements apply to cryptoassets?

The following entities providing services or offerings on digital assets are required to comply with Anti-Money Laundering/Countering the Financing Of Terrorism (AML/CFT) regulations:

  • DASPs that are required to register with the AMF (i.e., entities providing the service(s) of: (i) custody of digital assets; (ii) buying or selling digital assets in legal tender; (iii) trading of digital assets for other digital assets; and (iv) the operation of a trading platform for digital assets).
  • DASPs providing other services related to digital assets that choose to apply for a DASP licence with the AMF.
  • ICOs whose issuance has been approved by the AMF by means of a visa, but only with respect to the subscriptions received pursuant to the ICO.
  • Other actors (i.e., mostly DASPs that do not provide custody, crypto-fiat or crypto-crypto brokering services and the operation of a digital asset trading platform) are not subject to any AML obligations, provided the services they provide do not fall within the scope of AML/CFT legislation.

In accordance with the applicable AML directives and the DASP regime, registered/licensed DASPs are required to identify, assess and classify the risks to which they are exposed with respect to the activity they carry out, in order to provide effective guarantees that their services are provided in compliance with applicable AML/CFT regulations. This includes establishing and enforcing risk classification procedures in accordance with Article L.561-4-1 of the MFC.

The AMF and the ACPR (Autorité de contrôle de pévention et de résolution) are responsible for assessing, prior to granting a statute or visa, and on a continued basis once the relevant statute has been granted, the effectiveness of the AML/CFT procedures implemented by the companies subject to this regulation. 

These AML/CFT measures will be enhanced by the entry into application of the recast Fund Transfer Regulation (TFR), on December 31, 2024. This regulation will require DASPs (or “CASPs”) to comply with the so-called “travel rule” initially created by the FATF in June 2019. The travel rule would thus require CASPs to share information (name, wallet address, postal address, country, etc.) between beneficiaries and originators of cryptoasset transfers. The rule would apply from the first Euro for transfers involving two CASPs, and from EUR 5,000 for transfers involving a CASP and a so-called “self-hosted wallet”.

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7 . How is the ownership of cryptoassets defined or regulated?

Under French law, digital assets are classified as fungible intangible personal property. They may represent: 

  • a claim (to pay or to do) against the issuer of the token; or
  • a value (for digital assets that do not recognise any claim against the issuer or any other person). 

With regard to the regime for transferring ownership of digital assets, it is generally accepted that the solutions for book-entry financial securities can be transposed, mutatis mutandis, to the case of digital assets, despite the differences with financial securities. Thus, the registration of a digital asset in a blockchain in the name of an investor presumes the investor’s ownership of the digital asset. In short, digital assets represent rights or values, and are objects of ownership.

Although the notion of “control” is not a traditional concept in French law for qualifying ownership, it does seem to be adapted to the specific nature of these digital assets. 

Indeed, the notion of control has two aspects: 

  • the “positive” aspect refers to the ability to use an asset (for example, by exercising a voting right attached to it), or to dispose of it (for example, by initiating its transfer on the blockchain); and
  • the “negative” aspect, which refers to the power to restrict this use. 

However, this duality is already present to some extent in the classic notion of “possession” in French law, mentioned in two different articles of the French Civil Code (Article 2276 of the French Civil Code does not have the same content as Article 2337, without this posing any major difficulty).

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8 . How are Decentralised Autonomous Organisations (DAOs) treated?

There are currently no specific regulations regarding DAOs in France. However certain social forms provided for by French corporate law can be used to bring a certain legal reality to DAOs in France, this is how certain DAOs have set up an Association, or of a commercial company (SAS) to operate their activities in the legal world and try to limit the risks linked to the unincorporated companies.

Concerning DeFi — which is the ecosystem in which use cases relating to DAOs are most developed — the French banking regulator (the ACPR) issued a consultation paper in 2023 entitled “Decentralised or disintermediated finance: what regulatory response?”. For its part, the AMF issued in 2023 its preliminary thinking on the regulatory issues raised by the new financial activities on cryptoassets based on automated, decentralised and disintermediated protocols that make up the emerging DeFi ecosystem. 

French banking and stock market regulators examine the operation of DAOs on a case-by-case basis, to check that they are not carrying out a regulated activity. 

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9 . Are there any particular laws or rules which apply in the event of the crypto bankruptcy or insolvency?

There are no specific provisions for cryptoassets in France so the usual insolvency law will apply. 

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10 . Is a smart contract enforceable as a legal contract?

There is no specific regulation or law concerning the recognition of a smart contract under French law. But Articles 1125 to 1127-6 of the French Civil Code recognise the validity of contracts concluded electronically, and set out the procedures to be followed for them to be concluded. Under French law, a smart contract could be considered to be a contract concluded electronically in certain, very specific, cases. In such a case, the smart contract would have to comply with the conditions governing the validity of this type of contract. Notably, the offer must include specific information about the conclusion of the contract and the recipient must have the opportunity to check the details of their order and its total price, and to correct any errors before confirming it, to express their final acceptance. 

However, a significant part of the doctrine agrees that a strict interpretation of the notion of contract for smart contracts is not adapted. “Smart contracts” are more of a misuse and can be more like clause-executing programs as defined in the Vocabulary of digital assets on January 15, 2021.

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11 . What recourse does a victim of crypto fraud have?

There are no specific provisions for cryptoasset fraud in France. In the event of fraud, ordinary criminal law applies, and in particular fraud, breach of trust and theft. In practice, if the intermediary has been hacked or defrauded by a third party on the digital assets he holds in custody on behalf of his clients, he will be liable to his investor clients. The intermediary’s liability is then that of a custodian of fungible intangible assets. There have been several cases in which hackers or fraudsters have been convicted. 

Following the LOPMI law of January 24, 2023, Article 706-154 of the Code of Criminal Procedure provides that criminal seizure can be carried out under the same conditions as funds in a deposit account. This seizure cannot be made without an order from the judge of freedoms and detention.

If, as part of the debate on this law, it was proposed to extend criminal seizure to all digital assets, including those held in self-hosted wallets, the impossibility of carrying out seizures effectively on this type of tool at this stage has led to seizures being limited to DASPs.

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12 . Are there any other ongoing legal or regulatory consultations or other legal frameworks in the pipeline relating to cryptoassets?

As part of the implementation of the MiCA Regulation in France, the government has planned to adapt French law in order to amend provisions contrary to MiCA and continue to modernise French law on cryptoassets. Law no. 2023-171 of March 9, 2023 thus authorises the government to legislate by ordinance in order to transition from the PACTE Act Regime to and to align the French law with the MiCA Regulation, by adapting the provisions of the Monetary and Financial Code and, where necessary, other codes or laws, as well as the powers of the AMF and the ACPR. This legislation is to be expected in Q2 2024.

In parallel, France is about to introduce an unprecedented regime for “crypto-gaming” as part of the law to Secure and Regulate the Digital Space. Article 15 of this law recognises a new category of players called “JONUMs” (Jeux à Objet Numérique Monétisable or Games with monetizable digital objects). Situated halfway between the video games regime and the gambling regime, this text provides for the establishment of a three-year experimental framework during which JONUMs will have to notify the French Gaming Authority (ANJ) of their activity in France. While this regime is presented as a simplified framework compared with that for gambling, to protect innovation and France’s competitiveness in the Web3 sector, companies offering this type of game will have to comply with strict obligations relating to the fight against money laundering and the financing of terrorism, the protection of minors and the fight against addiction, with very strict limitations in particular on communication or on the characteristics of the rewards (often NFTs or other cryptoassets) that can be granted to users. In terms of timeline, while the text has already received a first reading in the French Senate and National Assembly in 2023, the Joint Committee (composed of seven deputies and seven senators) should validate the final version of this text. Subsequently, application decrees will specify the steps to be followed by players to comply with this unique framework.

EXPERT ANALYSIS

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Australia

Emily Shen
Peter Reeves
Robert O'Grady

Bermuda

Andrew Chissick
Daniel Hayward-Hughes
Natalie Neto
Rachel Nightingale
Sara Hall
Steven White

British Virgin Islands

Andrew Chissick
Daniel Hayward-Hughes
Iain Tucker
Iona Wright
Jan Golaszewski
Sara Hall

Canada

Ana Badour
Barry Sookman
Heather Meredith
Hugo Babos-Marchand
Lori Stein
Shane D'Souza

Cayman Islands

Daniel Hayward-Hughes
Ian Mason
Jan Golaszewski
Jennifer Maughan
Sara Hall
Lucy Frew

Cyprus

Christopher Lytras
Leonidas Grivas

Czechia

Filip Murár
Luděk Chvosta

India

Rohan Bagai
Shagun Badhwar

Italy

Alessandro M. Lerro

Portugal

Ashick Remetula
Carolina Nagy Correia
David Silva Ramalho
Luís Possolo
Márcia Tomás Pires
Nicole Fortunato
Vera Esteves Cardoso
Nuno Gundar da Cruz

Singapore

Stanley Tan
Yam Wern-Jhien

Taiwan

Eddie Hsiung

United Arab Emirates

Alishia K. Sullivan
Andrea Dougall
Katherine Seager

United Kingdom

Jane Colston
Jessica Lee

United States

Clara Krivoy
Sharix Alicea
Stephen Palley

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