French watchdog weights in on bitcoin derivatives

French Watchdog AMF Gets Tough on Bitcoin Derivatives

French stock market regulator Autorité des marchés financiers (AMF) recently released a statement revealing that bitcoin derivatives trading online are subject to the European Union’s Markets in Financial Instruments Directive (MiFID 2), whose framework requires that derivatives be regulated. The French Watchdog’s announcement follows a months-long review process.

Paris-based AMF also ruled that derivatives can’t legally be advertised online, a common practice within the industry. Per the regulator, the “recent cryptocurrency boom” saw online trading platforms offer contracts for difference (CFDs), binary options, and other derivatives tied to cryptocurrencies such as bitcoin. The platforms have investors ‘bet’ on a cryptocurrency, without actually owning it.

According to Bloomberg, firms like Plus 500 and IG Group Holdings offered these types of products. Kelsey Traynor, a representative for Plus500, revealed that all of the firm’s CFDs are compliant with AMF’s framework.

Cryptocurrency derivatives aren’t included in MiFID 2’s regulation list. Nevertheless, the AMF reasoned that “a cash-settled cryptocurrency contract may qualify as a derivative, irrespective of the legal qualification of a cryptocurrency”.

As such, the agency added:

“As a result, online platforms which offer cryptocurrency derivatives fall within the scope of MiFID 2 and must therefore comply with the authorisation, conduct of business rules, and the EMIR trade reporting obligation to a trade repository. Above all, these products are subject to the provisions of the Sapin 2 law, and notably the ban of advertisements for certain financial contracts.”

The French watchdog’s move is the latest in a EU-wide crackdown on cryptocurrency derivatives targeting retail investors.

French watchdog weighs in on ICOs

The AMF didn’t just get tough on bitcoin derivatives, but also weighed in on ICOs. The agency revealed that it conducted public consultation on potential supervisory options. It received 82 responses from academics, law firms, digital economy players, and finance professionals, among others.

Most respondents, per the agency, “support setting up an appropriate legal framework for this new type of funding”. The AMF offered respondents three options for consideration. These included promoting a best practice guide without changing existing legislation, extending existing legislation to treat ICOs as public offerings of securities, or propose new legislation adapted to ICOs.

The last option received 66% approval. AMF also revealed that respondents consider an informational document to be necessary, informing potential investors of some of the project’s aspects.

The agency added:

“Finally, the vast majority of respondents favour the establishment of rules making it possible to ensure the escrow of funds raised, and the setting up of a mechanism to prevent money laundering and terrorist financing.”