France is planning a regulatory framework for companies that raise funds using cryptocurrencies in a bid to attract more financial start-up business, even as most countries continue to exercise caution over what has been dubbed the “digital wild west”.
Bruno Le Maire, economy minister, said Paris hoped to introduce legislation that would allow companies to gain a formal stamp of approval for their initial coin offerings — a crowdfunding mechanism that uses digital currencies.
The rules would be intended to make France a global hub for ICOs, Mr Le Maire said. They would also lend legitimacy to a sector that remains loosely regulated and vulnerable to fraud and illicit activity, raising concerns among most national regulators.
“France has every interest in becoming the first major financial centre to propose an ad hoc legislative framework that will allow companies initiating an ICO to demonstrate their seriousness to potential investors,” Mr Le Maire wrote in an article on French news website Numerama.
“Blockchain will offer new opportunities to our start-ups,” he added, referencing the technology underpinning cryptocurrencies and the ICO process. “We won’t miss out on the blockchain revolution!”
ICOs involve a start-up company issuing “digital tokens” to investors in exchange for cryptocurrencies such as bitcoin. Tokens can be then used to access services produced by the issuer or sold on.
Their popularity as an alternative tool for fundraising has soared in the past year in tandem with surging cryptocurrency prices. More than 200 coins were launched in 2017, raising nearly $3.9bn for early stage companies globally, according to tracking website CoinSchedule. Already in 2018, around $4.5bn has been raised from 128 new tokens.
But national watchdogs have warned investors that many new projects are fraudulent, linked to illicit activities such as money laundering, or simply fail to produce the promised services.
Some countries such as China and South Korea have banned ICOs altogether. US regulators have begun a clampdown on the sector and said that where an ICO might qualify as a financial instrument, businesses would need to comply with financial regulations.
Still, a handful of countries, including Switzerland, the Cayman Islands and Gibraltar, have broken ranks to draw up regulations for the sector in efforts to lure start-ups.
France’s approach would be overseen by the national markets watchdog, the Autorité des Marchés Financiers, Mr Le Maire said. Companies would be able to apply for an ICO license from the AMF by meeting certain criteria designed to protect investors. But these licences would not be mandatory and unlicensed ICOs would not be banned.
“We’re aware of the risks and will monitor them,” said one person familiar with the government’s thinking. “But serious people that want to use this technology to raise funds should be allowed to do so, and should be rewarded for taking these kinds of protective steps that are good for investors and the market as a whole.”
The proposals follows a separate move by the French government at the end of last year to allow financial institutions to set up blockchain platforms for the trading of unlisted securities.
Source: FT.com
