• T Skevington and M Bacina

French financial regulator proposes new regulatory sandbox for security tokenisation


France’s Autorité des Marchés Financiers (AMF) has proposed a new a regulatory sandbox for Europe, specifically targeted at supporting the emerging security token industry.


As part of legal analysis on how current European financial regulations apply to security tokens published by the AMF on 6 March, the AMF has recommended an exemption mechanism at the European level, to be called the "Digital Lab". The intent of the Digital Lab is to allow European regulatory authorities to waive certain requirements imposed by European regulations that have been identified as incompatible with the blockchain environment. Entities who benefit from the waived regulatory requirements would be required to provide guarantees, or have other conditions imposed on the grant of waiver.


The AMF has proposed that the Digital Lab should run for at least three years, exempting projects from particular financial regulations deemed to be pose major compliance difficulties for security tokens. In particular, the analysis highlights that because the markets in financial instruments directive (MiFID) requires an authorisation as a multilateral trading facility (MTF) or organised trading facility (OTF), this excludes decentralised platforms.


Similarly, the AMF's analysis suggests that the European Regulation on Central Securities Depositories (CSDR) does not allow for full settlement in the blockchain. As a result:

a platform listing security tokens would have to either go through an intermediary approved as a central depository or be itself approved as such.

Other European regulators, including the European Securities and Markets Authority, have yet to comment on the AMF's proposal.


Speaking to why the AMF was making this proposal in a speech in Brussels, AMF President Robert Ophèle said:

As a regulatory authority, we need to understand these changes and ensure that our regulatory frameworks remain appropriate. These frameworks must make it possible to manage risks – to effectively protect users – without losing the benefit of innovations

Not unlike in Australia, Ophèle also noted that:

It is clear that certain European texts prevent the development of tokenized financial securities markets.

While the Australian FinTech sandbox has recently been expanded to facilitate further exemptions for entities to test financial and credit products and services without having to obtain a licence first, there has been no specific regulatory action taken to facilitate security token offerings.

© Michael Bacina. All rights reserved

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