The French Financial Markets Authority (AMF) has called on other European countries to implement more enabling regulations, including a regulatory sandbox for the security token industry. The AMF believes that the current regulations hinder the growth of blockchain technology in the region as they were designed for centralized systems.
The AMF recently conducted a legal analysis geared towards growing the interest in the issuance of financial instruments on the blockchain, including the development of security tokens. It suggested a European Digital Lab which will enable authorities “to waive certain regulatory requirements relating to securities settlement and delivery in return of appropriate guarantees.”
The AMF stated that in France, it’s legal to conduct security token offerings (STOs). Asset managers wishing to issue security tokens are free to do so in France as long as they apply for authorization from the watchdog.
Nevertheless, the European regulations still pose a hurdle to the development of the industry, the president of the AMF Robert Ophele stated in his speech at a European Union’s meeting in Belgium. He said:
“With regard to blockchain financial assets, i.e. tokenized financial securities, our traditional regulatory frameworks apply. But these frameworks were designed to frame centralized market infrastructures, so that they are not adapted to the decentralized character of the blockchain environment.”
However, despite the challenges they pose, these regulations will not disappear overnight and they still have a part to play, he believes. This puts the regulators in a ‘chicken and egg’ conundrum, where the blockchain industry needs better regulations to thrive, but the regulators need the industry to prove that it warrants a change in regulation.
Ophele suggested a solution, “A transitional solution would be, in our opinion, to allow experimentation with projects, without the obligation to comply with all of the aforementioned texts, provided that the development of these projects is carried out within a limited framework and under the supervision of the authorities.”
As the European Union seeks to develop regulations for the blockchain and digital currencies industry, it must expand its scope to deal with issues beyond money laundering and terrorist financing, Ophele suggested.
He stated, “Regulation should be more comprehensive to protect investors, guarantee effective pricing and bring transparency to the primary and secondary markets. The regulations to be designed should be inspired in part by traditional regulations, by adapting them to the specificities of digital assets. However, it should be proportionate and flexible.”
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