The French parliament recently passed the PACTE law, which will impact ICO/utility token issuers and crypto-asset service providers and provide legitimacy to the digital assets industry in the country.
The PACTE law is indicative of the steps France is taking to become a ‘Blockchain Nation’ and a leader in the digital assets space, with government officials recommending an investment of €500 million over the next three years to develop the country’s blockchain ecosystem.
We sat down with Jennifer D’Hoir, co-founder of Gide255 and Paris Blockchain Week to talk about regulation, the future of blockchain and Gide255.
For a long time, countries didn’t seem to know what to do with the crypto industry; they either applied laws that were meant for the traditional financial sector or left their legal status in limbo. What do you think sparked this change in attitude?
In my opinion, there are four elements of explanation that could be responsible for this change in attitude. Firstly, the emergence of champions and sound players, which showed the growing economic importance of the crypto-market (and the fact that it was not just an epiphenomenon). The necessity to ensure a level playing field between emerging players and historical players, as well as the necessity to tackle the risks stemming from this new market and to ensure investors’ protection.
For countries such as France, which plays host to Paris Blockchain Week, a series of events taking place under the joint High Patronage of the French Ministry for the Economy and Finance and the Secretary of State for Digital Affairs, government support has been instrumental in facilitating sound and sustainable development in this nascent industry.
While France is making a lot of progress with the new PACTE law, other countries such as India and China still do not recognize digital assets at all. Do you think a change will come soon?
It is always difficult to predict what regulatory route a specific jurisdiction will choose to go down — even more so with emerging technologies such as blockchain. If we look at cryptocurrencies, for example, the choice is often a political one because the development of the crypto-asset market is not an isolated trend. It is a stepping stone in terms of a broader change of business models, economic balance, and social impact.
The new legislation recommends that €500 million be put towards the industry over the next three years. In your experience, what aspects of the industry (education, startups etc) would most benefit from this funding?
The parliamentary report published last December, which recommends €500 million be ring-fenced for the blockchain industry over the next three years, will support the development of blockchain projects in the sphere of the public administration.
In order to foster the growth of blockchain, the report recommended the first step should lie with the French government to become actively involved by launching their own blockchain projects, rather than leaving it to the private sector of the economy.
How much of an increase in institutional investment do you see now that the crypto industry has legislative backing?
It is difficult to answer this question as the PACTE bill has not officially been enacted yet. The final law is expected to come into effect in June 2019.
While this law is certainly beneficial, some say that ICOs are dead and will be replaced by Security Token Offerings (STOs). Do you think ICOs are still the best choice for funding blockchain startups? Also, do you think STOs will replace them?
As with any new phenomenon, the crypto-market develops in successive phases. It is notably due to the fact that the underlying technologies are evolving fast and they offer new potentialities every day. The development of ICOs as an alternative and complementary means of financing for innovative projects illustrates a first phase. STOs are a new use case and very different in nature from ICOs, especially because a security token usually qualifies as a financial instrument. In this sense, it is not an unknown territory especially for incumbent players who may see an opportunity to enter the crypto market through the launch of STOs. Once the market stabilises, I expect we will see a combination of both.
What precedent does this new legislation set for the rest of Europe, even as talk of Brexit is still in the air?
The regimes provided for in the PACTE bill will set a precedent simply because they are unprecedented! The optional nature of the visa (for the issuance of utility tokens) and of the licensing for crypto-asset service providers (where crypto-assets do not qualify as financial instrument under French law) constitute a regulatory innovation. The French legislator aims at providing both legal clarity and certainty to market players and, at the same time, encouraging the sound development of a new ecosystem. The changes occurring are unprecedented and consequently require an unprecedented regulatory answer. The French example typically shows that legislators need to innovate by the law and with the law. This approach needs to be transposed at EU level to enable the development of a global and sound crypto market in Europe.
Could you tell us a bit about Gide255?
Gide255 is a multidisciplinary team, within Gide law firm, dedicated to innovation. We accompany our clients in their decision-making, implementation, and legal structuring as regards their digital strategy.
The team was set up in June 2018 by Franck Guiader, former Head of the Fintech, Innovation and Competitiveness division at the French Autorité des marchés financiers (AMF) , together with Matthieu Lucchesi and Jennifer D’hoir (also former managers at the AMF). For more information, visit https://www.gide255.com/?lang=en