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France’s crypto derivatives rules could be EU template

Jackson, Olly.  International Financial Law Review

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Trade Journal

International Financial Law Review

London: Euromoney Institutional Investor PLC

Citation/Abstract coverage: Sep 1982 - present

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; London (Mar 8, 2018).

Other jurisdictions will watch closely to see if the new framework for these types of derivatives will deter retail investors

France is the first European country to regulate cryptocurrency derivatives in a move that could signal a whole raft of inter-jurisdictional regulation for this sector. But attempts to limit retail investors from entering the highly volatile market could fail as the new rules provide legal certainty and investor protection.

With more cryptocurrency regulation inevitable in the coming months, this could prove to be an important test case and a strong indicator as to which way the rest of Europe will turn.  

France’s Autorité des marchés financiers (AMF) announced February 22 that cryptocurrency derivatives should be regulated just like any other financial instrument and therefore online platforms offering these are included under the new Markets in Financial Instruments Directive (Mifid II). As well as offering greater transparency and reporting requirements, this also means the products cannot be advertised via electronic means under France’s Sapin 2 law – which aims to provide transparency, reduce corruption and modernise the economy – and exchanges must comply with the European Market Infrastructure Regulation (Emir) reporting standards which requires counterparties to report details of a trade to a trade repository.

This is intended to restrict offerings to high net institutional investors, aligning the framework with the US, which regulates cryptocurrencies as securities and forces firms to comply with additional rules, including registering with the Securities and Exchange Commission. Contracts for differences and binary contracts are included under the derivatives umbrella.

Clarity and uncertainty

However Marc Perrone, partner at Linklaters in Paris, believes that a clear legal framework will boost cryptocurrency derivative investments, providing certainty and protection to retail investors which may go against the AMF’s original aims. Rules such as obliging counterparties to publish a prospectus if they are...