Securities over the Blockchain expected to get legal framework in France this fall

By Claude-Étienne Armingaud & Sidney Lichtenstein

The French Act no.2016-1691 dated 9 December 2016 on Transparency, Anti-Corruption and Modernization of Economic Life empowered the Government to amend the regulatory framework to facilitate the transmission of certain financial securities through blockchain technology.

In order to prepare such executive order, the Ministry of Finance initiated last Spring a public consultation, whose key trends were made public on 30 August 2017.

The 43 contributions included the points of view of local associations, banks, management companies, fintech pure players, academics, law firms and consultants, and provided operational and technical aspects to be taken into consideration in order for the new regulatory framework not to hinder the adoption of blockchain technology, while balancing security and foreseeability for all the players involved.

A majority of respondents considered that the use distributed ledger technology (“DLT”) for the transmission of securities, while already possible, could nevertheless fall within legal grey areas

They however called for the law applicable to data management, security and interoperability requirements, and even “know your customer” regulation (KYC) to not be explicitly defined as far as the blockchain is concerned, and should therefore be left outside the scope of the expected regulation.

The issue of DLT “governance” also divided the players. Consequently, it is expected that a technology-neutral legal framework will be balanced and limit the supervisor‘s interventions to the certification of blockchain managers for specific activities and substantive requirements for the ecosystems.

On the basis of the observation received, the Ministry of Finance will propose to the Government a draft executive order next Fall.