ICO cryptomoney

France, a land of welcome for cryptomonnages?

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The Government seems determined to make France a home for fundraising in cryptomoney (ICO). In Article 26 of the PACTE Act, the government proposes to include a chapter on token issuers in Book V of the Monetary and Financial Code, which deals with investment service providers. However, such a regulation will not be without raising a number of questions, given the extreme complexity of the subject, particularly with regard to the fight against money laundering and investor protection.
Open forum
 
Swould thus create an ex nihilo legal regime to regulate ICOs, based on a welcome definition of the legal concept of "token": would constitute a token "any intangible asset representing, in digital form, one or more rights, which may be issued, registered, retained or transferred by means of a shared electronic recording device making it possible to identify, directly or indirectly, the owner of the said asset".
In accordance with the recommendations made by the AMF, the introduction of an optional visa for offers in France is being considered. The aim is to create a reassuring environment for investors without unduly constraining players in the crypto-money industry.
However, such a regulation is not without raising a number of questions, given the extreme complexity of the subject, particularly with regard to the fight against money laundering and the protection of investors.
Moreover, despite the Government's stated intention, the development of ICOs is hampered in practice by two factors: taxation and access to bank accounts for token issuers.

The brake linked to the absence of a clear tax rule

There is still no clear tax rule, which makes it difficult, especially for token issuers, to know the tax treatment of tokens.
Indeed, the taxation of sales and gains, depending on the type of token issued but also on the time considered, raises many questions for both the issuer and the investor.
In terms of earnings, for example, a tax instruction of July 2014 provided for the potential application of two plans. A decision of the Conseil d'Etat of 26 April 2018 annulled this instruction, preferring the application of a third regime, while nevertheless reserving the application of the other two in certain cases .
 
An amendment tabled by Eric Woerth to the 2019 Finance Bill ("PLF") was intended to simplify this subject by applying a one-off flat-rate levy on the net gain on the disposal of an asset. However, this amendment was rejected pending the implementation of the Pact law. Pierre Person, Member of Parliament for Paris and rapporteur for the fact-finding mission on crypto-assets, nevertheless confirmed the application of this mechanism as from 2019 and specified that amendments relating to the tax regime for holding crypto-assets should be introduced in the second part of the 2019 PLF.
Equally important issues are the application of VAT to certain flows and the treatment of resale transactions on the secondary market.

The brake linked to the difficulties encountered in opening a bank account

According to the report of the commission charged with examining the PACTE bill, no Blockchain player would be able to open a bank account in France. This reluctance on the part of French banks is partly explained by the extraterritoriality of US regulations on the control of foreign assets.
It is true that the OFAC (Office of Foreign Assets Control) has recently updated its compliance rules to include crypto-currencies. In the USA, transactions in crypto-currencies now have to comply with the same compliance rules as traditional currencies, under threat of sanctions.
The FOCA also plans to add to the list of states and persons with whom it is forbidden to have business relations (Specially Designated Nationals And Blocked Persons), the addresses of the crypto-currencies to be avoided, while specifying that "this list is not intended to be exhaustive" and that the necessary precautions should be taken to block the transaction if the address is not secure.
It is therefore understandable that French banks are not in good shape in the face of so much uncertainty. It should be recalled that under other circumstances, BNP was fined EUR 7.9 billion in 2014 for non-compliance with the rules issued by the FOCA.
Thus, although the bill originally did not include any provisions relating to the opening of bank accounts, it was amended to require the Caisse des Dépôts et Consignations to open an account in its books "in the event of persistent difficulties in accessing deposit and payment services in credit institutions".
 
This solution may come as a surprise. Indeed, the legislator might have preferred to extend the procedure applicable to bank account law to issuers of crypto-currency. The proposed solution is perhaps intended to prevent a French bank designated ex officio by the Banque de France from finding itself sanctioned by American institutions.
 
In any event, it should be noted that the Caisse des Dépôts et Consignations should only intervene in a subsidiary capacity. As currently drafted, the PACTE bill requires credit institutions to establish objective, non-discriminatory and proportionate rules to govern the access of token issuers that have obtained AMF approval. If such access is refused, the reasons for the refusal must be communicated to the AMF and ACPR.
Despite these safeguards, Caisse des Dépôts et Consignations has made it known that it is hostile to this new responsibility, considering that it is not a retail bank and that it cannot subject French people's savings to the risks induced by the opacity and volatility of crypto-currencies.
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The next few months will therefore be decisive. Depending on the solutions finally adopted by Parliament, both from a legal and fiscal point of view, the Government's stated desire to make France an attractive place for ICOs may or may not be validated... or not.
 
Vincent MaurelAssociate Lawyer, with Arthur Boutemy and François Warcollier, Lawyers at Fidal
 

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