The PACTE draft Bill (Action Plan for Business Growth and Transformation) was adopted at its final reading in the French National Assembly on 11 April. Once enacted, the law will apply to fundraising through the issuance of virtual tokens (Initial Coin Offerings or ICOs) and digital asset services providers (DASPs).

Until now, fundraising through the issuance of tokens not classified as financial instruments was not subject to any specific rules. If it is enacted, the PACTE Law will change this. The law is designed to enable every project initiator to submit an information document to the Autorité des Marchés Financiers by way of application for an "optional visa," to be issued on condition that it meets certain requirements. These are:

• obligation for the issuer of the tokens to be incorporated as a legal entity established or registered in France;
• the provision of an information document that will provide all relevant information on the token offer, the project to be financed and the company;
• the setting-up of a system for monitoring and safeguarding the assets raised during the offer; and
• compliance with France's anti-money-laundering and anti-terrorist-finance rules.

The term “digital assets” comprises tokens issued during ICOs and virtual currencies as defined by European Union law (such as the bitcoin). Financial instruments are excluded from this regime.

If they wish, DASPs may be licensed and placed under the supervision of the AMF.

Their new optional status will cover a wide range of activities:

• custody of digital assets for third parties;
• purchase or sale of digital assets against legal tender or other digital assets (broker/dealer);
• operation of a digital assets trading platform (stock exchange);
• other services related to digital assets such as the reception and transmission of third-party orders, third-party portfolio management, advice, underwriting and "placing on or without a firm commitment basis."

The Bill wants to allow two types of fund to invest in digital assets: professional specialised investment funds (which have to comply with liquidity and valuation rules); and professional private equity investment funds subject to a limit of 20% of their assets.

Measures to protect investors

The PACTE draft Bill wants to give the AMF power to oversee the ICOs that have received its visa and to supervise licensed service providers. In the event of non-compliance with the rules, it proposes to allow the AMF to hand down sanctions against ICO issuers and licensed service providers.

It also wants to prohibit ICOs that do not have visas, and unlicensed service providers, from "soliciting" and from "patronage and sponsorship activities." Advertising is to remain authorised. The legislators want the AMF to publish a “blacklist” of ICOs and digital assets services providers who do not comply with the regulations.

Finally, it may, while also blocking people's access to fraudulent websites that offer services to do with digital assets.

So proud is the French legislature of this Bill that it wants the European Union to impose it on all other countries under its command.