The French Regulator AMF Suggests Sandbox for Blockchain Security Tokens
The French regulator AMF (Autorité des Marchés Financiers), has analyzed the legal barriers to using blockchain for security tokens. It recommends the production of a European digital lab or sandbox where national regulators can ease legal requirements.
AMF’s legal analysis
The AMF recognizes that security tokens are earning interest from both incumbents as well as blockchain ecosystems. It views tokenization as a natural move in the automation of post-trade processes.
In the statement, the regulator investigated two legal perspectives. First of all, the issue and sale of tokens and further their inclusion in investment funds. For funds, they didn’t see a significant regulatory hurdle at either a French or European level and advised asset managers should practice to the AMF to update their license.
For the issue and sale of tokens, where it is a centralized DLT platform, parties can comply with existing licensing requirements. Nevertheless, it’s more challenging for decentralized blockchains as a manager can’t be recognized.
AMF describes a circumstance where listing sells and buys orders without processing them may not need approval under the MiFID 2 Directive.
It’s the delivery and settlement where legislation recently needs a central securities depository.
AMF’s recommended approach
The sandbox or digital lab would provide national regulators to wave particular requirements. Nonetheless, the AMF proposes a trade-off. Therefore, the exemption would only be allowed if there is compliance with critical regulatory principles, and there is a higher level of oversight by the regulator.
The AMF paper is part of a series to be issued by the regulator. It earlier issued a working document intended to encourage the European Commission to produce a European digital strategy for financial services.
Consistent with today’s legal paper, it suggests that the involvement of mediators is old-fashioned in the age of blockchain. And it wants to view any approach as technologically agnostic, therefore providing for public blockchains.