France: Blockchain

The French ecosystem is booming and the number of companies offering services related to blockchain technology is rising steadily. The French market already counts two unicorns (i.e., companies with a value of over €1.5 billion), Ledger and Sorare. The French legislative framework has been set in 2019, with the adoption of the PACTE Act by the French legislator. The Pacte Act established a dedicated regime for crypto asset providers, by creating two distinct regimes, namely for digital asset service providers (DASPs) addressing the French market, and for initial coin offerings (ICOs) issued in France. It is also worth noting that the regime set forth under the MiCA Regulation with regards to crypto asset service providers is largely inspired by the DASP regime established under the Pacte Act.

The Pacte Act introduces a list of services on digital assets, which require a mandatory registration, for a part of them (namely, the custody of digital assets on behalf of third parties, crypto-crypto and crypto-fiat exchanges, and the operation of a trading platform), and an optional licensing for those services, with the French financial markets authority (Autorité des Marchés Financiers) (“AMF”) upon approval by the French prudential control and resolution authority (“ACPR”).

To date, more than fifty digital asset service providers (“DASPs”) have been registered in France but no DASP has been licensed yet[1]. However, this will evolve as companies prepare for the implementation of the MiCA regulation by applying for the DASP license, which is comparable in terms of requirements and substance to what will be required for the MiCA license.

The use of distributed legder technologies developed in a wide range of sectors. Main applications of blockchain technology are taking place in the private sector, and involve a broad spectrum of industries ranging from luxury goods to banking and finance.

In the luxury sector, LVMH has collaborated with two other names in the luxury industry, Prada and Cartier, in the creation of the first international blockchain dedicated to luxury goods, through ConsenSys’ and Microsoft’ technologies. The Aura Blockchain Consortium’s objective is to ensure a new mode of communication regarding the origin of products, their authenticity, their supply and sustainability. [2].

In the banking sector, Societe Generale Forge, a fully integrated subsidiary of Societe General Group, aims to bridge the gap between capital markets and digital assets. It achieves this purpose by providing investors and issuers with the means to manage and issue digital financial tokens on public blockchains such as Ethereum. On April 2019, Societe Generale Forge was the first bank to issue a bond of a hundred million euros of “security tokens” on the Ethereum blockchain[3].

France is now a hub for blockchain technologies and demonstrated so through the organization of many events with international influence (ETHCC, Paris Blockchain Week, Binance Blockchain Week, etc.). Paris has also been selected as one of the six European Innovation Incubators launched by Binance on the BNB Chain, the world’s largest blockchain in terms of daily active users[4].

Companies of the blockchain industry, as well as their counsels (lawyers, accountants, etc.) are organized and regrouped within the Association for the Development of Digital Assets (ADAN), an association highly engaged with political institutions and regulators to advance the rights of blockchain stakeholders.

[1] https://www.amf-france.org/fr/espace-professionnels/fintech/mes-relations-avec-lamf/obtenir-un-enregistrement-un-agrement-psan#Liste_des_PSAN_enregistrs_auprs_de_lAMF

[2] https://www.lvmh.fr/actualites-documents/actualites/lvmh-sassocie-a-dautres-grandes-marques-de-luxe-sur-aura-la-premiere-blockchain-de-luxe-internationale/

[3] https://www.societegenerale.com/fr/actualites/newsroom/societe-generale-emet-la-premiere-obligation-securisee-sous-forme-de-security

[4] https://www.binance.com/fr/blog/ecosystem/bnb-chain-lance-son-incubateur-web3-dans-6-villes-europ%C3%A9ennes-4395748894748023561

In early 2022, ADAN unveiled a groundbreaking study, conducted in partnership with KPMG France, which provides an overview of the crypto sector in France, the level of adoption among the adult population (i.e., people over 18 years old), and projections for the economic opportunities associated with the industry’s development[5].

According to the study, 8% of the French adult people have already invested in digital assets, which includes both cryptocurrencies and non-fungible tokens (“NFTs”). Conversely, 6.7% of this population owns stocks (according to a study conducted by the AMF). Therefore, to date, and despite the youth of the technology underlying digital assets, more French people own digital assets than stocks. In addition, this study highlights that 37% of French people have already invested, or intend to do so in the short term.

With regards to NFTs, it is worth noting that Sorare, a French unicorn, has over 1.8 million users in the NFTs gaming market. On July 2022, Ledger, the other French unicorn, announced its marketplace Ledger Market dedicated to NFTs.

The most used digital assets as of today are stablecoins, assets whose value is backed by a legal tender, or by a basket of assets. On June 16, 2022, the U.S. Company Circle, the world’s second-largest issuer of stablecoins, announced the launch of EUROC[6], a crypto asset pegged to the euro. This announcement is all the more important as it highlights two major shortcomings: the lack of euro stablecoins available on the market and of European players to issue them. Circle is therefore stepping into this breach, following the world leader Tether who had already launched its EURT in 2021.

Therefore, and despite the growing adoption of digital assets among the population and the variety of use cases developed by French native companies, there is still no significant European euro-pegged stablecoin that has been developed yet, and that would be able to compare with American and USD-pegged stablecoins.

[5] https://adan.eu/rapport/crypto-france-structuration-adoption

[6] https://www.circle.com/en/euro-coin

No known instances of intersections between ESG and blockchain technology.

France was one of the first jurisdictions to implement a dedicated legislation for services and activities on digital assets.

The introduction of the concept of blockchain by the French legislator was gradual. The notion of DLTs was first introduced in 2016 by Ordinance No. 2016-520 of April 28, 2016[7], which allowed the use of a distributed ledger for recording the issuance and sale of minibonds (“minibons”). The notion of blockchain was truly enshrined by the so-called “Blockchain Ordinance” dated December 8, 2017 (ord. no. 2017-1674), which was clarified by a decree dated December 24, 2018 (dec. no. 2018-1225). From now on, and since the Blockchain Ordinance, the registration of a company’s securities transactions on a DEEP (blockchain technology type) stands in lieu of a book entry. This opens up many possibilities for companies to use blockchain technology for securities movements, including automating a company’s capitalization table and its real-time updating. The maintenance of a register of securities movements can also be managed automatically using blockchain. For example, it is possible to register on a private blockchain the transactions of a company’s financial securities, which makes them forgery-proof and traceable. For each transaction carried out on the capital of a company, the corresponding information can then be recorded chronologically and automatically on the register of movements of securities of the company in question.

These developments resulted in the adoption of the Pacte Act by the French legislator in 2019. The Pacte Act established two distinct regimes, namely for digital asset service providers (DASPs) addressing the French market, and for initial coin offerings (ICOs) issued in France. It is also worth noting that the regime set forth under the MiCA Regulation with regards to crypto asset service providers is largely inspired by the DASP regime implemented by the Pacte Act.

The Pacte Act introduces a list of services on digital assets which require a mandatory registration, for a part of them (originally, the custody of digital assets on behalf of third parties and crypto-fiat exchanges), and an optional licensing for those services, with the French financial markets authority (Autorité des Marchés Financiers) (“AMF”) upon approval by the French prudential control and resolution authority (“ACPR”).

The Pact Act further introduced the definitions of digital assets (“actifs numériques”) and tokens (“jetons”).

An ordinance published in December 2020 (Ordinance No. 2020-1544 of Dec. 9, 2020[8]) modified the regime for digital asset service providers established by the PACTE Act by extending the scope of services on crypto-assets requiring mandatory registration with the AMF to the services of exchange of digital assets against other digital assets, and the operation of a digital asset trading platform[9].

The ordinance also strengthened the AML/CFT obligations of DASPs by allowing them to rely on third parties for the implementation of their due diligence duties when entering into a business relationship and to carry out these same duties themselves, on behalf of third parties. It prohibits DASPs from keeping anonymous accounts. Finally, it requires, except in certain limited cases and under certain conditions, DASPs belonging to groups to inform the entities of this group of the suspicious transaction reports they have made and confirms the possibility, under certain conditions, for parent companies to benefit from intra-group exchanges of information relating to suspicious transaction reports.

French law has therefore established a dedicated regime for digital assets. The qualification of digital assets is however subsidiary, as the form must not take precedence over the substance of the asset. Accordingly, only digital assets that are neither financial instruments nor electronic money or saving bonds can be qualified as digital assets under French law, and be eligible to the DASP or ICO regimes. In this context, a digital asset can be deemed a financial instrument and be subject to the regulation applicable to financial services if it meets the criteria established under Article L. 211-1 of the French Monetary and Financial Code (“MFC”).

Under the DASP regime, four services listed under Article L. 54-10-2 of the MFC therefore require mandatory registration with the AMF, upon assent of the ACPR: custody on behalf of third parties, exchange of digital assets against other digital assets, exchange of fiat against digital assets, operation of a trading platform on digital assets. Any DASP can optionally ask for a license with the AMF for the remaining services listed in Article L. 54-10-2 of the MFC, which include portfolio management of digital assets, advising acquirers of digital assets, underwriting of digital assets, and secured or unsecured placement of digital assets.

The DASP regime applies to all services on digital assets provided in France, a condition that is met when the service is supplied by a DASP having facilities in France, or at the initiative of a DASP non-established in France to customers residing or established in France[10] (active solicitation). Conversely, services provided on a reverse solicitation basis by an entity not established in France are not subject to French law.

In addition to the DASP regime, the Pacte Act has set a regulatory framework for ICOs. ICOs are defined as a fundraising operation carried out through a blockchain that results in the issuance of tokens which can then be used to obtain products or services.

The French legislator introduced a specific regime for public offerings of tokens, subjected to the obtention of an optional visa issued by the AMF. In accordance with the principle under which financial instruments should not be qualified as digital assets, this regime applies exclusively to the issuance of “utility tokens”.

[7] Ordinance No. 2016-520 of April 28, 2016

[8] Ordinance No. 2020-1544 of Dec. 9, 2020

[9] 3° and 4° of article L. 54-10-2 of the French Monetary and Financial Code

[10] Article 721-1 RGAMF.

Adopted in May 2019, the PACTE Act has strengthened the role and powers of the AMF in regulating digital finance. The PACTE Act aimed to propose a legislation adapted to the particularities of blockchain technology and of its ecosystem, as well as to ensure a good balance between investor protection and support for innovation.

The role of the AMF is to protect investors and ensure the effectiveness of financial markets. In doing so, the authorities have mainly issued numerous communications to consumers to warn them of the risks associated with investing in digital assets, including price volatility. Furthermore, the AMF frequently updates a white list and a black list of ICOs and DASPs, to inform current and prospective holders of the good practices of operators operating on the French market[11].

In 2016, both the AMF and the ACPR established internal fintech and blockchain technology dedicated teams, that operate as “innovation hubs”[12].

On the other hand, the Banque de France is actively leading experiments focusing on the development of CBDCs.

These different initiatives demonstrate the French government’s growing interest in these new technologies. This interest reflects through the creation of a Ministry for Digital Transition and Access to Telecommunications headed by Jean-Noël Barrot who is replacing Cedric O, the former Secretary of State for Digital Transition.

Moreover, it is undeniable that France has implemented an innovative legal framework that has allowed it to become a leading jurisdiction for blockchain technology.

Conversely, on October 10, 2022, the European Parliament approved the final versions of the MiCA and the revised Transfer of Funds Regulation (TFR) presented by the Committee of Permanent Representatives of the Council of the European Union (COREPER). While MiCA aims to regulate crypto-assets, TFR aims at limiting money laundering, by requiring actors to identify clearly the people involved in transfer of digital assets, without minimum value limits. In addition, the DLT Pilot Regime, which is part of the Digital Finance Package, and introduced by the European Commission in 2020, aims aims at developing the trading and settlement for blockchain financial instruments. The objective is to further enable and support the potential of digital finance while mitigating associated potential risks.

Obviously, these upcoming European measures will have a substantial impact on the French blockchain industry.

[11] https://www.amf-france.org/fr/espace-epargnants/proteger-son-epargne/listes-blanches

[12] https://acpr.banque-france.fr/sites/default/files/medias/documents/20170717-cp-fintech-en.pdf

Faced with the emergence of new technologies and in particular blockchain, two systems have been established by regulators: the Sandbox system (“regulatory sandbox”) and the Soundbox system (“proportional regulation”).

In France, the interest for CBDCs is increasing. On September 27, 2022, the Banque de France held a conference at the famous Louvre Museum on the role of Central Banks considering the opportunities and challenges of the tokenisation of finance.[13]

The Banque de France is a pioneer in this field and aims to explore, the potential contribution of new technologies to improve the functioning of financial markets. In concrete terms, the Banque de France has successfully tested the use of a blockchain developed by its teams to experiment the use of CBDCs to settle a digital financial securities issue carried out by Société Générale Forge[14]. These experiments will be an important contribution of the Banque de France to the more global reflection conducted by the Eurosystem on the advantages of a CBDC.

On November 8, 2021, the Banque de France published a report on its CBDC experiments which constitutes the first phase of its experimentation. It emphasized that CBDCs could help ensure the safe development of tokenised financial markets by preserving the central role of central bank money. Moreover, in October 2022, the Banque de France joined a consortium of 14 banks and market infrastructures to conduct an experiment whose objective is to issue cross-border payments in a test environment to study the interoperability between different blockchains and existing payment systems[15].

[13] https://www.banque-france.fr/conference-opportunities-and-challenges-tokenisation-finance-which-role-central-banks-27-september

[14] https://www.banque-france.fr/communique-de-presse/succes-de-lexperimentation-dutilisation-de-monnaie-numerique-de-banque-centrale-mnbc

[15] https://www.banque-france.fr/en/communique-de-presse/banque-de-france-participates-new-wholesale-central-bank-digital-currency-experiment-swift

The regulator and public authorities frequently consult the industry, notably through the Association for the Development of Digital Assets (“ADAN”), on blockchain-related topics, in order to obtain insights on the state of the sector and technical expertise.

Besides, the AMF has published numerous consultations providing guidance on its understanding and position on assets relying on blockchain technology. In this respect, the AMF published a public consultation on Initial Coin Offerings in 2017, as well as an analysis on the legal qualification of derivatives whose underlyings are digital assets in 2018, and updated in 2021. In March 2020, the AMF published an analysis on the applicability of the French financial regulation to security tokens.

A year after the legislator introduced the DASP regime through the PACTE Act, the AMF published a regulatory guide to help digital asset service providers through their registration and licensing procedure[16]. The guide is in the form of a Q&A in which the regulator provides guidance on the application of the legislation. For example, it clarifies that a joint reading of the French monetary and financial code[17] implies that the qualifications of digital asset and electronic money[18] are mutually exclusive.

The regulator keeps updating the Q&A to preserve its relevance considering the constant evolution of the industry, and notably changes in the products and services that can be deployed.

In January 2022, the ACPR published a charter entitled “Charte pour l’instruction des dossiers d’autorisation fintech” (Charter for the examination of fintech companies authorization files), in which it provides guidance on fintechs’ requests for authorization to operate in France. Six months of work were required to draw up this charter, the aim of which is to help fintechs better understand the regulatory framework related to their activity[19].

[16] AMF position, DOC-2020-07.

[17] Articles L. 54-10-1 and L. 315-1 of the French monetary and financial code

[18] Article L. 315-1 of the French monetary and financial code : Electronic money is monetary value that is stored in electronic form, including magnetic form, representing a claim on the issuer, that is issued against the remittance of funds for the purposes of payment […] and that is accepted by a natural or legal person other than the electronic money issuer.

[19] https://acpr.banque-france.fr/sites/default/files/media/2022/01/06/20220106_charte_fintech_fr.pdf

In France, cryptocurrencies are not deemed a currency. Article L. 111-1 of the Fench Monetary and Financial Code states that the currency of France is the euro.

With the forthcoming of MiCA regulation, DASP registration will be required for all the mentioned services on the European level, as well as for additional services[20].

Registered DASPs are subject to many anti-money laundering obligations including, without being limited to, risk evaluation, customer due diligence, vigilance measures at entry and throughout the business relationship, reporting of suspicious transactions, record keeping, and internal control obligations[21].

There also is a taxation regime, implemented by the 2019 Finance Act, specific to digital asset transfers and that can be summarized as follows:

• Exchanges of digital assets against other digital assets are not a taxable event[22].
• The trigger for taxation can be the following: exchange of a digital asset against fiat money, exchange of a property other than a digital asset or exchange for value of a digital asset or service.
• The net gain of a non-professional activity is in priciple taxable at the flat rate of 30%, of which 12.8% corresponds to personal income tax and 17.2% to social security contributions.
• Activities carried out in a professional capacity are taxable in the category of industrial and commercial profits (regime of professional capital gains).
• When opening a virtual assets account in a foreign institution, the taxpayer has to declare the profits derived from its foreign accounts. Failure to do so may result in a fine of 750 euros by undeclared account.

This regime was completed in the 2022 Finance Act. As of January 1, 2023, the proceeds from the purchase, sale and exchange of digital assets carried out under conditions similar to those characterizing an activity by a person engaged in a professional capacity in this type of transaction are taxable as non-trading profit[23].

Within the framework of the 2023 finance bill, the ADAN made many proposals regarding the taxation of digital assets. On the one hand, the MiCA regulation will lay down uniform requirements for the offering of crypto-assets other than asset-referenced tokens and e-money tokens (stablecoins). On the other hand, the TFR regulation extends the “travel rule” to crypto-assets.

As for NFTs, they should be excluded, for many of them, from the scope of the MiCA regulation (i.e., digital assets that are unique and not fungible with other digital assets, including digital art and collectibles, whose value is attributable to each NFT’s unique characteristics and the utility it gives to the token holder). Interestingly, new clarifications have considerably reduced the scope of this exclusion. In fact, some collections have been recognized as having a certain degree of fungibility (the so-called broad collections and series of NFTs)[24]. In any case, the European Commission is tasked with assessing the need for a dedicated ad-hoc regime for NFTs within 18 months after MiCA’s entry into force[25].

[20] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CONSIL:ST_13198_2022_INIT&from=EN

[21] https://www.amf-france.org/fr/actualites-publications/dossiers-thematiques/lutte-anti-blanchiment

[22] Article 150 VH bis of the French general tax code.

[23] Article 92 of the French general tax code.

[24] https://adan.eu/communique/accord-final-mica-tfr

[25] https://www.amf-france.org/fr/actualites-publications/actualites/marches-de-crypto-actifs-accord-europeen-sur-le-projet-de-reglement-mica

There is no specific prohibition on the use or trading of cryptocurrencies. However, registered DASPs must continue to comply with the conditions for obtaining their regulated status, particularly with regard to their LCB/ FT obligations (mentioned in question 9), at the risk of losing their status and of not being able to continue providing their services in France.

France was one of the first countries to adopt a specific legal regime dedicated to the raising of funds through the issuance of digital assets. These offers have developed since the end of 2016, due to the rise of blockchain technology.

Prior to the offer, article 552-1 of the French Monetary and Financial Code provides that it is possible for the issuer to request an optional visa delivered by the AMF.

Obtaining the visa from the AMF can be an advantage in the communication strategy and will facilitate the diffusion of the tokens offering. Indeed, only token offerings having been priory approved by the AMF through the visa process can be promoted through active solicitation. The current practice reveals the risks linked to the ICO (inconsistency of the project in certain hypotheses, speculative character of the investment). Under these conditions, obtaining a visa, with the serious examination of the file that such an application implies, proves to be a guarantee of quality for the projet. Without being an insurance, the visa allows, as much as possible, the investor to evolve in a particularly secure and pre-validated framework.

Since 2019, only three entities obtained a visa from the AMF in connection to their ICO (French-ICO, WPO and iExec Blockchain Tech ), the last one being on 13 October 2020. However, as indicated, most of the companies that contemplate proceeding to an ICO do not request a visa from the AMF and launch their projects outside this regulatory framework.

The PACTE Act created an optional regulatory regime for ICOs. ICO issuers may choose to ask the AMF to grant its approval (or visa) to their ICO – but they may also launch an ICO without the AMF’s visa. The AMF’s visa serves as proof of the trustworthiness of an ICO issuer and of its project, and grants certain marketing and canvassing rights with respect to the ICO. Issuers applying for an approval must meet the following conditions:

• the issuer must be a legal entity incorporated in France, or registered in France through a branch;
• the issuer must prepare a white paper providing detailed information on the offering and the issuer itself; and
• the issuer must implement adequate procedures to track and safeguard the funds raised as part of the ICO (especially if digital assets are collected).

Cryptocurrency trading in France is growing at a fast pace as demonstrated in the study conducted by KPMG and the ADAN. The crypto market is decreasingly considered a “niche” considering how it tends to be institutionalized. In March 2021, Boursorama Bank (a French institution) has implemented a new feature giving the ability to provide access to the funds held in Coinbase, Binance and Kraken exchanges directly on its clients’ bank account[26]. Moreover, this year, Banque Delubac & CIE and Societe General Forge have both obtained the DASP status with the AMF, paving the way for adoption by mainstream financial institutions.

However, many crypto companies are struggling, or even failing, to get access to deposit and payment services that would allow them to carry out their activity under conventional conditions. Despite the recognized right under French law to have access to a bank account in a banking institution, and the reaffirmation of this right by the PACTE Act once the company has obtained a DASP registration, banks are still reluctant to open bank accounts to companies delivering services in connection with digital assets.

[26] https://www.boursorama-parrainage.info/actualites/agregation-comptes-externes-crypto-monnaies-possible-boursorama-banque#:~:text=chez%20Boursorama%20Banque-,L’agr%C3%A9gation%20de%20comptes%20externes%20en%20crypto,monnaies%20possible%20chez%20Boursorama%20Banque&text=Boursorama%20Banque%20a%20mis%20en,comptes%20bancaires%20de%20ses%20clients.

Under French law, tokens which present the characteristics of financial instruments within the meaning of French law financial instruments are qualified as financial instruments. Thus, they are excluded from the digital asset regime and fall under the regime of financial instruments and services.

In June 2022, the European Commission proposed to create a transitional regulatory framework to test the use of blockchain in market infrastructures (the DLT Pilot Regime). This experiment should start at the beginning of 2023 for a period of 3 years, renewable once[27].

[27] https://www.amf-france.org/fr/actualites-publications/actualites/infrastructures-de-marche-sur-blockchain-publication-du-reglement-europeen-regime-pilote

To date, no regulation or judicial precedent specifically applies to the enforceability of smart contracts. However, the French legal community tends to distinguish between two cases[28]. On the one hand, the smart contract is an automated computer program executing a separate and validly formed agreement; on the other hand, the computer code itself is the entire agreement.

In the second case, verifying the consent of the parties of the agreement would be difficult. For an agreement to be valid, according to the French civil code, parties must give their valid consent (by a person not lacking in legal capacity, free from duress, etc).  Moreover, difficulties would be characterized by the absence of definition of competent jurisdiction and choice of law.

However, with regard to French Law and the absence of regulation of smart contracts, the qualification of the latter may vary depending on their use case and the type of physical or digital asset the underlying code is referring to.

[28] https://actu.dalloz-etudiant.fr/le-billet/article/tout-nest-pas-contractuel-dans-le-smart-contract/h/e77de942a481a433555c5435df36c4d0.html

There are many ambitious decentralised finance projects using smart contracts and led by French people (ParaSwap, StakeDAO, Cometh, Unslashed Finance, Kleros, APWine, Aleph, Jarvis Network, Rekt, BlackPool, Curve, etc.) One key initiative would be Morpho Labs which is a software development company contributing to a protocol improving liquidity on existing underlying lending protocols in decentralized finance. They successfully completed an $18 million financing round this year 2022[29].

[29] https://www.telecom-paris.fr/morpho-labs-finance-non-lucrative-blockchain

Unlike in the United States, where the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) can regulate by enforcement, to date, France has no known regulatory or enforcement actions concerning blockchain.

However, French regulators have a whitelist and blacklist system. Service providers can carry out their activity as long as they are registered or licensed (i.e., in the whitelist)[30]. When a service provider no longer meets the conditions for registration or approval, it is removed from the whitelist, and can no longer continue providing services on digital assets otherwise it may be subjected to criminal sanctions[31].

[30] https://www.amf-france.org/fr/espace-epargnants/proteger-son-epargne/listes-blanches

[31] Article L. 572-23 of the French Monetary and Financial Code.

Two important cases have been rendered that address blockchain technology.

Firstly, on the European level, the Court of Justice of the European Union issued a decision on October 22, 2015 regarding the VAT exemption regarding exchanges of traditional fiat currencies for bitcoin. Secondly, on the national level, the Commercial Court of Nanterre in a ruling on February 26, 2020 was interested on the legal nature of bitcoin and related loans.

First, with regards to the legal nature of bitcoin, the court held that this digital asset is fungible and consumable. Fungible because each bitcoin is of “the same kind and quality” in the sense that the bitcoins are all derived from the same computer protocol and that they are equivalent to other bitcoins in the sense of article 1347-1 of the Civil Code. Consumable by virtue of its use, in that each bitcoin would be “consumed” when used, whether to pay for goods or services, to exchange for currency or to lend, just like legal tender, even though it is not legal tender. As to the characterization of the bitcoin loan contract, the court held that it was a consumer loan within the meaning of Article 1892 of the Civil Code.

Finally, with respect to the treatment of the profits attached to the bitcoin loaned, the court ruled that these profits were the borrower’s, in accordance with the rules applicable to consumer loans. Article 1893 of the Civil Code provides that “by the effect of this loan, the borrower becomes the owner of the thing lent; and it is for him that it perishes, in whatever way this loss occurs.  The court in this case did not take any position on the legal nature of bitcoin, which was not even asked. The interest of this more modest decision lies elsewhere. The judges considered that since bitcoin is fungible and consumable, the legal qualification of the three Bitcoin loan contracts concluded by the parties is that of a consumer loan. All of the consequences associated with this type of loan apply to the bitcoin loan, including Article 1902 of the French Civil Code, which requires the borrower to return the things lent, in the same quantity, and at the agreed time[32].

[32] Tribunal de commerce de Nanterre, 6ème Chambre, 26 février 2020, n° 2018F00466

1) Privacy and data protection

In the European Union, the protection of personal data is governed by Article 16 of the Treaty on the Functioning of the European Union (TFUE) and Articles 8 and 9 of the Charter of Fundamental Rights of the European Union. Technological innovation has triggered the need for a high level of protection of personal data, principle the underlie of the adoption of the Regulation (EU) no. 2016/679 of April 27, 2016 (GDPR). Nevertheless, the GDPR does not expressly address the recent development of the blockchain sector.

In France, few regulations concern the protection of personal data. Only, GDPR and the law no. 78-17, of January 6, 1978 amended in 2018.

The GDPR protects several rights for individuals in relation to their data including:

• The right of access;
• The right erasure;
• The right to rectification; and
• The right to object to processing.

The fact that the data are not held by a single entity in the public blockchain raises several legal questions, including whether and how these rights could be enforced.

Moreover, the GDPR states that the personal data of individuals are protected when the information is likely to reveal the identity of the individual directly or indirectly. Article 5 of the GDPR Directive states that personal data must be: “collected for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes”. Since there is no initial purpose for the processing of mass data, it is only the subsequent analysis that gives the data a purpose. However, incompatible post-processing of data is still allowed provided that the data processor has a legitimate interest that overrides the rights of the individual. In principle, the data available on the public blockchain is mainly anonymous address and transaction information. Therefore, it does not provide precise information about individuals. Therefore, data privacy issues may only occur if personal data is broadcasted to the network, for example if it is included in a transaction’s code.

On, September 2018, the French data protection authority (the National Commission on Informatics and Liberty, CNIL) published an analysis on the appropriateness of blockchain technology and the GDPR. The CNIL point out that as soon as personal data are available in a blockchain, the rules of GDPR applies. Still, the CNIL is using common sense and says that the GDPR cannot be applied with respect to public blockchains, and recommends that users do not store unencrypted personal data in a blockchain.

Under French law, there is a subtle distinction between data privacy and data protection, and most of the rules resulting from the GDPR actually focus on data privacy, which refers to the right of collecting and processing. In contrast, data protection are more related to responsibility of the entity processing the data.

There is also the question of data ownership. Who should benefit from its ownership? The fintechs, and more broadly the companies? Individuals? One of the thoughts on the regulation of personal data is why companies should profit from something inherent to individuals, namely data. The Conseil d’Etat^[33] reminds us that current law does not recognize the ownership of personal data by individuals. These issues should become more and more important with TFR.

2) The probative value of blockchain

As mentioned above, blockchain allows for the recording of transaction history. With the rapid evolution of technology, the use of blockchain as a means of proof is increasing more and more, which leads us to wonder about its probative value in French law. Indeed, there is currently no text expressly recognizing the probative value of blockchain. Similarly, no French court has yet ruled on the validity of such evidence for the moment. However, the legislator is willing to give it more importance in light of the rapid evolution of technologies. This desire is reflected in a ministerial response of December 10, 2019^[34], which emphasizes that the evidence provided by blockchain must be assessed in light of the common law of evidence.

With regard to proof in matters of French law, the legislator distinguishes two categories of proof. On the one hand, perfect proof enumerated in article 1369 of the Civil Code which consists of authentic acts received by a competent public officer. On the other hand, imperfect proof, which may be a beginning in writing, testimony for which the judge is not obliged to take into account. Thus, the admission of blockchain proof falls within the realm of imperfect proof, (i.e., a beginning of proof by writing for the time being). The admissibility of blockchain is confirmed by article 1366 of the Civil Code, which states that “An electronic document has the same probative force as a paper document, provided that the person from whom it originates can be duly identified and that it is drawn up and preserved under conditions that guarantee its integrity”. Since probative value must be assessed in the light of the Civil Code, the conditions of article 1358 apply. Indeed, article 1358 of the Civil Code provides that proof is free for legal facts. Thus, blockchain is an admissible means of proof.

However, we can see a willingness on the part of the legislator to recognize blockchain as authentic proof with a possible improvement of its probative value in the years to come.

In the absence of a legal regime in French law, directly applicable European law provides specific provisions for electronic time stamping. The regulation of July 23, 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing (eIDAS). Article 41 eIDAS recognizes the legal effect and admissibility of an electronic time for instance.

[33] Avis du 22 mai 2018 sur la protection de la vie privée à l’ère du numérique, JORF n°0126 du 3 juin 2018. V. aussi : CE, Rapport annuel 2014, « Le numérique et les droits fondamentaux », spé. p. 26.

[34] https://questions.assemblee-nationale.fr/q15/15-22103QE.htm

Under Article L. 312-1 of the French Monetary and Financial Code, individuals and legal entities have the right under French law to open an account with a banking institution. However, the right to an account is a major and recurring problem for actors working in the blockchain technology industry. The actors of the sector encounter difficulties to open a bank account within a bank institution. A recent report by the ADAN mentions these difficulties, stating that nearly three out of four “crypto” companies using blockchain have experienced great difficulties in using a banking service or even opening a bank account. As a result, the regulatory authorities (AMF and ACPR) have played a role of mediator to find a compromise on reassuring traditional banks on control standards and allowing players to establish banking partnerships[35]. Nevertheless, the French Banking Federation refused to join the report made by the authorities.

In addition, companies approved as DASPs may refer to the ACPR if they have been refused a bank account under Articles L. 312-23, D. 312-23 and D. 312-24 of the French Monetary and Financial Code. This specific procedure for DASPs, introduced by the PACTE law, is proving to be long and costly for the actors. They therefore have to resort to the common law procedure. This one foresees that in case of refusal to open a bank account, the bank must imperatively deliver a certificate of refusal. Following this certificate, it is possible to request the opening of a bank account from the Banque de France. However, banks take a long time to issue this certificate.

Recently, on March 11, 2022 the French government has published a decree on the procedure of right to an account, which presumes acquired the refusal after a period of 15 days following the request to open a bank account.

In addition to the difficulties actors face in opening a bank account, several legal questions remain such as the concept of “exclusion control”. Finally, a point of clarification remains possible. Whether it is digital assets, digital financial securities or transferable electronic documents, all use blockchain technology at some point. The main observation is that the concept that emerges to qualify the holding of digital assets is the concept of “exclusive control”. However, the notion of exclusive control is not a concept in French law. The equivalent in French law would be the notion of possession provided for in article 2255 of the Civil Code. Thus, legal scholars are currently questioning the incorporation into French law of the notion of “exclusive control”.

[35]Forum Fintech ACPR-AMF – Compte-rendu des travaux du groupe de travail sur l’accès des prestataires de services sur actifs numériques (PSAN) aux comptes bancaires et sur le fonctionnement des comptes de clients bancaires lors d’achat ou de vente d’actifs numériques – 25.03.2021