Legal development

FinTech Newsletter No 4

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    Regulation and Guidance

    1. Extension of the transitional period for crowdfunding services providers


    On 15 September 2022, Order no. 2022-1229 (accessible here in French) and Decree no. 2022-1230 (accessible here in French) extended by a further 12 months the transitional period for firms authorized to provide crowdfunding services in accordance with French law (see our FinTech Newsletter #3 here), in line with the European Commission decision of 12 July 2022. The new deadline will now fall on 10 November 2023.

    The AMF General Regulation was also updated following an implementing Decree of 10 November 2022 (accessible here in French) to reflect the extension of this transitional period.

    2. ACPR AML-CFT principles of application for DASPs


    The ACPR published on November 2022 the sector-specific principles of application of AML-CFT requirements for Digital Asset Service Providers (accessible here in French); an explanatory document that aims to facilitate the implementation by DASP of their AML-CFT measures by setting out the expectations of the ACPR and Tracfin (the French financial intelligence unit).

    In particular, the document provides information on:

    • Risk assessment and risk classification: the list of documents to be considered by DASPs in their risk assessment and risk classification, as well as the risk factors specific to digital assets;
    • KYC and transaction monitoring: the procedures for ensuring constant monitoring on flows in digital assets, monitoring in the context of transactions involving anonymity-enhanced cryptocurrencies or privacy coins or in the event of ransomware;
    • Suspicious transaction reports (STRs): the data to included in the STRs, notably relevant blockchain, public address of the client, etc.;
    • Freezing of assets: the specific procedures for implementing such measures and in the context of the Ukrainian conflict, the criteria for alerting attempts to violate or circumvent restrictive measures by using digital assets.

    3. Adaptation of French securities law to DLT market infrastructures

    #PilotRegimeRegulation #DLTmarket infrastructures

    On 23 November 2022, the French Government filed with the French Senate a Bill ensuring compliance with European Union Law (Projet de loi DDADUE) (accessible here in French), which includes an Article 5 on the adaptation of financial securities law to market infrastructures based on distributed ledger technology (DLT).

    Since the Order of 8 December 2017 on DLT, French law allows unlisted financial securities to be registered on DLT, yet French securities law is still to be amended to ensure full compliance of French law with the provisions of Regulation (EU) 2022/858 of 30 May 2022 on a pilot regime for market infrastructures based on DLT.

    The Bill is still under discussion before the French National Assembly.

    4. AMF Position paper on open finance

    #Openfinance #opendata

    As part of the European Commission’s work on an open finance framework, the AMF published on 20 December 2022 a position paper presenting is proposals for opening financial data on investors (accessible here in English).

    In this position paper, the AMF expresses the following views:

    • The framework for the opening up of investor-related data held by financial intermediaries should be designed with the prime objective of serving the interests of investors by stimulating competition and the emergence of new financial services. Only the data strictly necessary for the provision of those services should be used by third party actors.
    • The regulatory framework must impose a level-playing field for existing providers and provide a safeguard for the use of data retained by financial service providers, notably to better fight against fraud. The client's explicit consent should be given before sharing any data, for a clearly identified service provider and service.
    • To make the supervision of this framework operational, a specific “provider of open data-related services” regulatory status could be created, taking into account the existing services of information on accounts and payment originator statuses in the Directive (EU) 2015/2366 of 25 November 2015 on payment services. In no case it would replace the statuses provided for by Directive 2014/65/EU of 15 May 2014 on markets in financial instruments.

    5. AMF Guidance update for DASPs

    #DASPs #fitandproper #licence

    The AMF published on 21 December 2022 an update of its guidance on Digital Asset Service Providers, in particular the Q&A on the digital asset service providers regime (DOC 2020-07 accessible here in French).

    The guidance tackles the following topics:

    • Ability of financial investment advisers (conseillers en investissements financiers – CIF) to provide an advisory service to subscribers of digital assets without a DASP license: They will however be required to comply with the conduct of business rules applicable to them when carrying out "other wealth management advisory activities" as set out at Article L. 541-8-1 of the MFC;
    • Fit and proper assessment of the senior managers and qualifying holders of the DASP: An approach in line with the EBA and ESMA guidelines on the assessment of the suitability of members of the management body and key functions holders.
    • Changes in the DASP situation and reporting requirements to the regulators;
    • Promotional communications to French consumers: Required to be clear and not misleading, in line with the provisions of the French Consumer Code, including those governing sponsorship. The AMF also recommends registered DASPs to issue specific communications on risks;
    • Complaint handling process: A complaint handling policy is required from licensed DASPs, and a complaint handling system is recommended from registered DASPs.

    6. Future revenue sharing platforms – AMF warning on risks and applicable regulation

    #royalties #real-estate

    On 23 December 2022, the AMF reminded platforms proposing investments in real estate as “royalties” of the regulation applicable to them (accessible here in French) and warned investors against the risks associated with these investments (accessible here in English).

    In essence, the AMF considers that:

    •  These instruments qualify as financial securities representing a claim, within the meaning of Article L. 228-36-A of the French Commercial Code.
    • As a result, platforms that offer these instruments to the public must notably comply with regulations governing the public offer of financial securities (including Regulation (EU) no. 2017/1129 of 14 June 2017) and, where applicable, regulation governing :

      • on the status of crowdfunding service provider;
      • on the status of investment service provider; and 
      • on the management of alternative investment funds (AIFs).

    In addition, in the public warning, the AMF stresses that:

    • sales pitch may mislead investors into thinking they are the owners of the property;
    • in addition to the risks usually associated with an investment in real restate, the investors bear a risk attached to their status as creditors of the company that owns the property; and
    • some platforms do not comply with applicable regulations, which aim to protect investors through the quality of the information provided, the handling of complaints, or the access to the AMF Ombudsman.


    French Treasury report on developing insurance for cyber risks

    #cyber risks

    On 7 September 2022, the French Treasury published a report (accessible here in French) on the development of insurance on cyber risks. Cyber risk covers all risks related to the use of digital technologies. It is an operational risk concerning the confidentiality, integrity or availability of data and information systems, resulting from human and unintentional error as well as voluntary IT maliciousness. While the growing cost of cyber attacks is creating a need for insurers to cover cyber risks, the cyber risk insurance market is struggling to emerge, notably due to insufficient market structuring.

    The French Treasury sets out a series of recommendations to:

    • clarify the legal framework of the cyber-risk insurance;
    • promote a better assessment of cyber-risks;
    • strengthen the sharing of risks between insured, insurers, and reinsurers; and
    • raise cyber-risks awareness.

    In parallel, at the EU level the European Commission’s legislative proposal “Digital Operational Resilience Act” (DORA) aims at creating a harmonized framework across the financial sector by requiring financial entities to manage cyber-risks in a robust and effective way.

    Sanctions & Decisions

    AMF Board

    27 September 2022


    On 27 September 2022, for the first time the AMF announced the withdrawal of a digital asset service provider (DASP) registration, with immediate effect (the decision is available here in French). The withdrawal of the DASP registration followed an on-site inspection carried out by the ACPR revealing:

    • failures to comply with AML/CFT requirements with insufficient KYC measures;
    • failure to comply with asset freezing measures; and
    • transactions carried out without the client’s consent.

    The AMF now keeps a list of delisted DASP on its website, along with the reasons for delisting. Under French law, the AMF may, with the ACPR approval, withdraw a DASP registration (i) when the DASP no longer complies with the requirements associated with its registration, (ii) where the DASP has not started its activity within a period of twelve months after its registration or has no more activity for at least six months or (iii) at the initiative of the DASP, if it ceases its activity.


    French Fintech Week

    The second edition of the French FinTech Week, was held from 14 to 21 October 2022 (more information accessible here).

    Notable events include:

    • the Fintech Forum, organized by the AMF and the ACPR, on 19 October 2022 (more information accessible here); and
    • the Fintech R:Evolution conference, organized by France Fintech, on 20 October 2022 (more information accessible here).


    Venus transaction – Issuance and distribution of CBDC

    #CBDC #DLT

    On 29 November 2022, the Bank of France and the Central Bank of Luxemburg jointly assisted the European Investment Bank (EIB) in the Venus transaction (the press release is accessible here in English). The Venus transaction consisted in a 100 million EIB digital native bond issuance under Luxembourg law on a DLT operated by Goldman Sachs Bank Europe (GSBE). Subscriptions were settled through a distinct DLT operated jointly by the Bank of France and the Central Bank of Luxemburg on which they issued and distributed digital representations of euro denominated central bank money in the form of tokens which can be described as an experimental Central Bank Digital Currency (CBDC).


    Authors: Hubert Blanc-Jouvan, Partner ; Agathe Motte, Partner ; Maxime Gandibleux, Counsel ; Aurélien Fournier-Her, Counsel ; Francesco Assi, Senior Associate ; Oriane Lemesle, Associate ; Lucien Jarry, Associate

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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