European Union: Recent ICO Guidelines In France And Switzerland

After our recent client alert summarizing recent U.S. regulatory developments in the crypto-world, the House of Representatives of the State of Wyoming passed HB 70, referred to as the "Utility Token Bill" and HB 19, known as the "Bitcoin Bill." While these bills are intended to create a separate regulatory apparatus for cryptocurrencies and initial coin offerings ("ICOs")1, the Wyoming bills, if passed by the Wyoming State Senate, would have limited efficacy since they would only apply to virtual currencies developed and sold exclusively within the State of Wyoming.

European market authorities have also been seeking to find a way to regulate ICOs. On February 16, 2018, the Swiss Financial Market Supervisory Authority ("FINMA") published ICO guidelines, and the French Financial Market Authority ("AMF") published soon afterwards, on February 22, 2018, its analysis of the legal qualification of cryptocurrency derivatives, as well as ICO guidance resulting from a public consultation of the relevant actors on the French market.

However, while both regulators are motivated to bring more clarity and certainty to the legal environment surrounding ICOs, they do not pursue it in the same way. In its guidelines, FINMA's logic stems from securities law and seems to hinge on whether the issued tokens will be used to finance the development of a non-existing service or activity, or to the contrary, whether it will be used to pay for or access an existing service platform or application.2 The AMF's reasoning, on the other hand, seems to dispense with existing regulations and creates a new legal framework unique to ICOs independently of the nature of the token (payment, utility, etc.), except in cases where the issued tokens share the same characteristics as a security, and thus are subject to EU prospectus regulation.

I. FINMA's Guidelines for Inquiries Regarding the Regulatory Framework for ICOs

FINMA stated in its press release that the ICO guidelines it published set out how it intends to apply financial market legislation and principles when handling inquiries and responding to ICO sponsors. It is therefore clear that the Swiss regulator's guidelines shed some light on its principles-based approach but hardly constitute a definitive legal framework for ICOs.

In assessing ICOs, FINMA will examine whether the ICO complied with applicable anti-money laundering regulations and investor protection and disclosure requirements, and will also focus on the economic function and purpose of the blockchain-based units known as tokens issued by the ICO sponsor. FINMA highlighted the underlying purpose of the token, their tradability and transferability as key factors of its assessment and classified tokens in three categories:3

  • Payment tokens, according to FINMA, are identical to currencies and have no further functions or links to other development projects.
  • Utility tokens provide digital access to an application or service.
  • Asset tokens represent assets such as participations in real (physical) underlying assets, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.

In respect of the above-mentioned criteria, FINMA will handle ICO inquiries as follows:

  • Payment ICOs: In ICOs where the token is intended to function as a means of payment, FINMA will not treat such tokens as securities.
  • Utility ICOs: The tokens would not qualify as securities if (i) their sole purpose is to confer digital access rights to an application or service, and (ii) the utility token can already be used in this way in the token's existing ecosystem. However, a utility token that functions as an investment (in economic terms) will be considered by FINMA to be a security.
  • Asset ICOs: FINMA regards asset tokens as securities and will apply securities law as well as civil law requirements under the Swiss Code of Obligations (prospectus requirements for instance) to those tokens.

As a result, FINMA's guidelines demonstrate the importance of engaging legal counsel when structuring ICOs since the design and function of the ICO will determine the body of rules and regulations that the regulator will apply to the ICO. As will be discussed below, the French regulator's principles-based approach seems similar to that of its Swiss counterpart; however, the AMF's recent guidance is not identical to FINMA's and the AMF's guidance may suggest a willingness to adopt a new legal framework for ICOs.

II. The AMF's Guidance on Cryptocurrency Derivatives and ICOs

a. The Legal Qualification of Cryptocurrency Derivatives

According to the AMF, EU law – and consequently French law – does not give a definition of derivatives, but instead lists different types of financial contracts or instruments that are deemed to be derivatives,4 in order for the existing legislation to be flexible enough to adapt to the ever-increasing creativity of the participants in the financial markets.

The AMF intervened after several online trading platforms started offering investors the possibility of betting on a cryptocurrency's rise or fall without actually buying the underling cryptocurrency, through binary options, contracts-for-differences or Forex contracts with an end-of-day maturity (rolling spot forex). The French regulator's analysis consisted of an examination of (i) the legal qualification of a "derivative" in the context of cryptocurrencies and (ii) whether a cryptocurrency is eligible to be an underlying asset for derivatives under applicable laws and regulations.

The AMF consequently concluded that a cash-settled cryptocurrency contract may qualify as a derivative, irrespective of the legal qualification of the cryptocurrency itself. Practically, this means that platforms which offer cryptocurrency derivatives must (i) not electronically advertise these products,5 (ii) obtain the necessary administrative authorizations, and (iii) comply with existing business conduct rules including the trade reporting obligation under EMIR.6

b. The Summary of Responses Following the Public Consultation on ICOs

The AMF is in the process of implementing its 'Universal Node to ICOs Research & Network' ("UNICORN"), which is being effectuated through dialogue with ICO issuers and entrepreneurs. In that regard, it issued a discussion paper on October 26, 2017 and received 82 responses from participants in the French market.

When asked about their preferred approach to ICO regulation, the majority of respondents opted for the adoption of new legislation that would specifically regulate ICOs instead of adopting a best practice guide without changing existing legislation or extending the existing regulation on public offerings to ICOs. In addition, respondents were unanimous in their support of requiring a document – a 'whitepaper' – that would inform potential investors notably of (i) the ICO project, its stages and its development, (ii) the issuing entity, its managers and founders and their qualifications, (iii) the rights conferred by the tokens, and (iv) the accounting treatment of funds raised during the ICO. The vast majority of respondents also favor putting the funds raised by the ICO in escrow and complying with anti-money laundering and terrorist financing regulation.

With respect to the legal qualification of tokens, the AMF seemed to support the view that they neither qualify as debt securities nor warrant the application of the "miscellaneous assets" regime,7 but that they might be considered equity securities if they provide the rights typically afforded to shareholders, which would require a facts-and-circumstances analysis by the AMF. Consequently, it was suggested that ICO issuers targeting French investors secure the AMF's approval of the ICO prior to its launch in order to provide a guarantee to investors that the ICO is not too risky from a regulatory perspective.

In conclusion, the AMF is far from finished regulating ICOs and continues to work on an ad hoc ICO legal framework in coordination with the other relevant public regulators and authorities.


[1] In this regard, HB 19 exempts virtual currencies from the Wyoming Money Transmitter Act and HB 70 specifies that a virtual currency that is classified as a "utility token" pursuant to the bill is neither traditional currency nor a security, thus, exempting it from various requirements under Wyoming state law.

[2] In that respect, the Swiss regulators approach is similar to the SEC's application of the Howey test.

[3] The individual token classifications are not mutually exclusive. Asset and utility tokens also can be classified as payment tokens (referred to as hybrid tokens). In these situations, the requirements are cumulative, meaning the tokens are deemed to be both securities and means of payment.

[4] See Market in Financial Instruments Directive 2014/65/EU ("MiFID"), Annex 1, Section C. See also articles L. 211-1 III and D. 211-1 A of the French Monetary and Financial Code ("CMF").

[5] See French 'Sapin II' Law no.2016-1691 of December 9, 2016 on Transparency, the Fight against Corruption and the Modernization of the Economy.

[6] Regulation (EU) No. 648/2012 of the European Parliament and of the Council of July 4, 2012, on European Market Infrastructure Regulation ("EMIR").

[7] A specific legal framework under French law, which applies to intermediaries who deal in assets other than securities; see article L.550-1 CMF.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions