1 APPROACHES AND DEVELOPMENTS
There have been significant developments in global approaches to the regulation of Fintech in recent years with new opportunities, risks and challenges for market participants, customers and regulators arising from Fintech.
Such areas of Fintech could include electronic payments, "robo advice"/algorithmic-based advice, trading and lending platforms, cryptocurrencies and related initial coin offerings/token-generating events and other blockchain technology-based applications.
In the last few years, France has jumped into the race to become Europe's top Fintech jurisdiction. Although France cannot boast any world-scale Fintech "unicorn", the scene is very active and a lot of promising startups were born or reached a significant scale in the last few years. French Fintech startups are supported by a strong network of business angels, venture capital funds, and professional organisations and associations. In addition, established financial institutions have adopted an open stance regarding Fintech. Some of them have created Fintech or Insurtech incubators, and most of them regularly establish business partnerships with startups. Buyouts of Fintech startups by large banks or insurance companies are also frequent.
France does not have per se an approach regarding Fintech regulation. Fintech, "the term used to describe the impact of new technologies on the financial services industry" (according to the European Commission), is not a legal notion. Fintech is firstly understood as an "umbrella term" covering various innovative business models related to the broader financial sector. Therefore, in France, the regulation to which a Fintech company may be subject depends on its activities. Whether a company self-identifies as a Fintech company has no legal impact. Still, both legislators and regulators (the Autorité des marchés financiers or "AMF" - the financial markets authority, and the Autorité de contrôle prudentiel et de régulation or "ACPR" - the banking and insurance regulatory authority) have adopted a welcoming attitude. There is a shared agenda towards improving France's position on the global Fintech scene and establishing France as the leading European Fintech hub, in the wake of the United Kingdom's exit from the European Union.
During the last few years, the AMF and the ACPR have launched multiple Fintech initiatives, such as the Fintech Forum in July 2016 (a consultative body gathering representatives from Fintech startups and financial institutions), the creation of internal Fintech teams acting as "innovation hubs" in 2016, or the creation of the Universal Node to ICO's Research & Network ("UNICORN") in October 2017 by the AMF, a taskforce dedicated to initial coin offerings ("ICOs").
On the legislative side, first of all, it is worth noting that most of French financial and banking law derives from EU directives and regulations. As the EU legislative process is rather slow, emerging Fintech-related trends often find themselves "unregulated". Therefore, France regularly makes the first move and initiates the regulation of these emerging trends at the national level. For example, France passed a framework regulating crowdfunding and crowdlending in 2014, while the European Commission only issued the first proposal of its regulation on European crowdfunding service providers on March 2018. Similarly, during the first half of 2018, France decided to include a regulation of ICO issuers and crypto-assets service providers in the draft bill nicknamed "Loi Pacte" (which stands for "Action Plan for the Growth and Transformation of Companies"). The EU authorities, on the other hand, are still conducting preliminary consultations and assessing the need to legislate on ICOs and crypto-assets at the EU level.
Recent, impending or proposed changes to the Fintech-related regulatory architecture in France
While, as stated above, most of the French legislation applicable to financial markets and banking and payment services derives from EU directives or regulations, three recent or impending Fintech-related reforms are worth mentioning.
First, France created in 2014 a comprehensive legal framework for crowdfunding and crowdlending activities. Crowdfunding transactions up to 2.5 million are now exempted from the obligation to publish a prospectus while, before, issuers willing to raise over 100,000 in equity or bonds were subject to these requirements. In addition, the 2014 reform also introduced a new exemption from the banking monopoly (i.e. the rule prohibiting entities other than licensed banks from granting interest-bearing loans) allowing individuals to grant loans through crowdlending platforms. Crowdfunding and crowdlending platforms have to register with the ACPR and/or the AMF either as crowdfunding/crowdlending intermediaries (for donations and crowdlending platforms) or as crowdfunding investment advisors (for investment-based crowdfunding).
Then, with Ordinance No. 2017-1674 of 8 December 2017 and Decree No. 2018-1226 of 24 December 2018, the French government introduced innovative legislation allowing blockchain technology to be used to issue, register and transfer unlisted securities. The distributed ledger used to register securities must comply with four main technical conditions: (i) the integrity of the information recorded must be preserved; (ii) the distributed ledger must allow the identification of the owners of the securities, and the nature and number of securities held; (iii) a continuity plan including an external data recording system must be set out; and (iv) the owners of the securities registered on the distributed ledger must be able to access their statements of transactions. This legislation does not specify which of the issuer or its service provider will be responsible for the compliance of the distributed ledger with these technical requirements. The distinction between private and public blockchains is not addressed either. Complying with some of these technical requirements could be more complicated when a public blockchain is used.
Finally, the major impending Fintech-related legislation is the Loi Pacte. The Loi Pacte was discussed at length by both chambers of the Parliament, and was finally adopted on 11 April 2019 by the Assemblée nationale. It is expected that the Loi Pacte will be enacted in May or June 2019.
This bill contains a patchwork of measures aimed at facilitating the growth of small and medium-sized enterprises ("SMEs") and giving employees and stakeholders more control over corporations. More importantly, the Loi Pacte introduces a comprehensive regulatory framework for ICOs and crypto-assets service providers. (This new framework will not apply to tokens which share the same characteristics as financial instruments: the offerings of "security tokens" will have to comply with existing regulations.) With respect to ICOs and cryptocurrencies, the Loi Pacte contains three key measures:
Optional AMF approval for ICOs. The AMF will grant an approval ("visa") to public offerings of tokens. This approval will be optional and not mandatory: potential token...