What has happened?

France's financial regulator has said that financial products based on cryptocurrencies should abide by authorisation and business conduct rules and must not be advertised online.

What does this mean?

The Autorité des marchés financiers (AMF) said that following an analysis of the legal qualification of cryptocurrency derivatives, it has concluded that platforms that offer these products must follow authorisation and business conduct rules.

The watchdog said that the recent cryptocurrency boom has spurred several online trading platforms to offer binary options, contracts for difference or Forex contracts with an end-of-day maturity (rolling spot forex), where the underlying is a cryptocurrency.

Such contracts allow investors to bet on a cryptocurrency’s rise or fall, without holding the underlying.

The AMF said it carried out its legal analysis of cryptocurrency derivatives following a twofold process of reasoning, namely to:

  • determine the legal qualification of the notion of “derivative” in the context of cryptocurrency derivatives; and
  • consider whether a cryptocurrency could be legally regarded as an eligible underlying.

The AMF said that EU legislation does not define the notion of "derivative" per se, and under MiFID II EU lawmakers only set out a list of derivatives (such as options, futures, swaps or forwards), followed by a list of eligible underlyings.

"The AMF concludes that a cash-settled cryptocurrency contract may qualify as a derivative, irrespective of the legal qualification of a cryptocurrency," the regulator said.

"As a result, online platforms which offer cryptocurrency derivatives fall within the scope of MiFID II and must therefore comply with the authorisation, conduct of business rules, and the EMIR trade reporting obligation to a trade repository."

In addition, these products are subject to the Sapin 2 law, most notably to the ban of advertisements for certain financial contracts.

The regulator has also released the results of its consultation on initial coin offering supervision from October 2017, which showed that a large majority of respondents expressed support for setting up an appropriate legal framework for this new type of fundraising.

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