In a report, the French securities regulator Financial Markets Authority (AMF) identified some obstacles to the development of blockchain and stated that they are strategic priorities that need to be eliminated.
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They asked the European Commission to formulate a digital strategy for European financial services and recommended that the EU "allow the issuance and trading of financial instruments (i.e. tokenization) on the blockchain by removing existing legal barriers."
In the first such recommendation from regulators, they pointed out some of the issues previously raised by industry players. Here are some of them cited:
"After conducting an in-depth legal analysis, the Financial Markets Regulatory Authority identified several legal obstacles to the development of blockchain securities:
(I) It is necessary to determine the blockchain administrator as the settlement system. This does not include the decentralized securities trading platform that actually exists on the blockchain. More broadly, it does not include the public blockchain based on decentralized consensus The use of the website does not allow any administrator to be identified;
(Ii) Credit agencies or investment companies allow individuals to use the intermediary obligations of the settlement system. At present, the settlement system seems to be incompatible with the functions of securities trading platforms with direct access on the blockchain;
(Iii) Obligations to settle securities transactions in cash, central bank currency or commercial currency.
Three areas of work will be considered: (i) a revision of the European text, which identified obstacles to title development on the blockchain;
(Ii) Taking into account the particularity of the blockchain and its decentralized nature, formulate special regulatory regulations for blockchain securities. Given the immature market, it is difficult to conceive such regulations at this stage;
(Iii) Establish experimental space within Europe, allowing national authorities (ANC) to repeal certain obligations under European regulations that have been determined to be incompatible with the blockchain environment, provided that entities that benefit from this exemption should comply with the regulations Key principles and subject to enhanced supervision by their national authorities.
This system will require the establishment of a management mechanism at the European level so that national authorities can exchange and coordinate their practices.
Such a system would help eliminate the regulatory obstacles that prevent the development of blockchain securities market infrastructure projects. These projects can be implemented in a secure environment without the need to immediately modify European regulations. Once the ecosystem is more mature, national authorities can Rely on the expertise you have gained in supporting your business to intervene safely.
Removing the regulatory obstacles that hinder the development of financial instruments on the blockchain is a strategic priority, as projects cannot be developed at all under the current regulatory state. " Many laws governing investment and / or financing markets were severely outdated because they were designed for documented financing at the time.
For example, due to the limited nature of documents, which are more prone to forgery, companies must maintain a register of shareholders.
In addition, financings such as initial public offerings (IPOs) often require bank and other intermediaries, and there are many laws and regulations governing such intermediaries, some of which require intermediaries.
As far as the U.S. regulator, the Securities and Exchange Commission (SEC), they see an IPO on the blockchain as no different from a IPO in the form of a document, because they see only similarities.
AMF's analysis concludes that there are also differences between the two. For example, the blockchain itself is a bank. In addition, it is also a record holder and a proof of ownership. If the proposal is passed, it would be possible to conduct regulated digital home financing in Europe, which is currently not possible in the United States. This will make the EU's jurisdiction very attractive in this area, as regulators there clearly see an opportunity for accommodative policy, and the SEC has said: "We will not innovate for you."
In contrast, German lawmakers gave banks the right to provide crypto services, while France passed a law at the end of 2018 that mandated banks to provide account services to blockchain companies in the crypto space.
This is reminiscent of the 2014 competition between London and New York on Bitlicense, and London eventually became the global fintech capital.