Clifford Chance

The Autorité des marchés financiers (AMF) has published its legal analysis setting out the conditions under which financial regulation is intended to apply to security tokens that legally qualify as financial instruments.

This document covers both the issuance and exchange of security tokens and their registration in investment funds. The AMF's legal analysis provides clarifications on the regime applicable to financial instruments registered on a shared electronic registration system (DEEP) and on the obligations of collective investment scheme depositaries. 

According to the document:

• the Prospectus Regulation appears compatible with security tokens offerings (STOs), but the information contained in the prospectus will have to be adapted to the specific features of security tokens;
• the exchange of security tokens is facing major legal obstacles because of the decentralised nature of blockchain technology.

The AMF therefore suggests:

• the creation of a European "Digital Lab" to secure the settlement of financial instruments in the blockchain notably by suspending regulatory obstacles to token security market infrastructure projects. Such "Digital Lab" would allow national competent authorities to waive certain European law requirements which are incompatible with the blockchain environment subject to appropriate guarantees (notably, the entity benefiting from the exemption would have to comply with the key principles of the regulations and be subject to increased supervision by the relevant authority);
• to specify in an AMF position the perimeter of the concepts of trading venues and bulletin board;
• to clarify the fact that, as a matter of constant law, the financial securities registered in a Blockchain take nominative form under French law and that the liability of collective investment undertaking (CIU) depositaries is limited to record keeping.

Following its legal analysis, the AMF published a position (DOC-2020-02) which clarifies the scope of the trading venue, applicable in particular to financial instruments registered in a distributed ledger.

Sophie Péligry contributed to the writing of this article