The French Government is generally supportive of the development of cryptoassets and adopted specific regimes in May 2019 under the “Pacte” Law (Law n°2019-486 dated 22 May 2019 on business growth and transformation). From a French finance law perspective, NFTs are at the crossroads of several legal qualifications and regimes.
In accordance with article L. 552-2 of the French Monetary and Financial Code, a token (jeton) can be defined as any intangible asset representing, in digital form, one or several rights which can be issued, recorded, stored or transferred by means of a shared electronic recording device (dispositif d'enregistrement électronique partagé) that enables the owner of the asset to be identified, directly or indirectly. Depending on their characteristics (in particular, the condition relating to the representation of one or more rights, NFTs which do not grant access to products or services but only have an authentication aim), non-fungible tokens could be captured by this legal definition.
Multiple legal regimes can apply to tokens (and by extension NFTs), depending on their characteristics.
NFTs which do not qualify as financial instruments under French law will fall under the scope of the digital assets (actifs numériques) regime (articles L. 54-10-1 et seq. of the French Monetary and Financial Code).
This regime aims at providing a legal framework for a wide range of services on digital assets which are very much inspired by MiFID II (e.g the service of holding digital assets or accessing digital assets on behalf of third parties, where applicable in the form of private cryptographic keys, with a view to holding, storing and transferring digital assets, the service of buying or selling digital assets in legal tender or the service related to the exchange of digital assets for other digital assets). The provision of certain services (i.e the aforementioned services and the operating of a trading platform of digital assets) on French territory or by providers located in France requires prior registration to the French financial markets authority, the Autorité des marchés financiers (the “AMF”). Market players can also request an optional license as digital assets services provider (prestataire de services sur actifs numériques) (“PSAN”) with less requirements as compared to a license for an investment services provider under the MiFID II regime. This license enables PSANs to carry out financial canvassing (démarchage financier) in relation to services on digital assets (article L. 341-10, 6° of the French Monetary and Financial Code). It also enables the promotion of such services to French consumers by electronic means with a view to inviting a person, by means of a response or contact form, to request or provide additional information, or to establish a relationship with the advertiser, in order to obtain his or her agreement to carry out a transaction on such digital assets (article L. 222-16-1, a of the French Consumer Code) and to conduct sponsorship or patronage campaigns promoting such assets targeting French consumers (article L. 222-16-2, 2° of the French Consumer Code), these activities being otherwise forbidden without obtaining such a license.
Activities on NFTs may also be covered by the regime of crowdfunding services providers as laid down by the recent Regulation (EU) 2020/1503 of 7 October 2020 on European crowdfunding services providers and articles L. 547-1 et seq. and L. 548-1 et seq. of the French Monetary and Financial Code.
In addition, persons conducting these activities may also be covered by the regime of intermediation in various goods (intermédiation en biens divers), which is in particular applicable to any person who offers one or more clients or potential clients the opportunity to acquire rights in one or more assets by promoting the possibility of a direct or indirect financial return or similar economic effect (article L. 551-1, II of the French Monetary and Financial Code). Should the NFT offer a financial return or a similar economic effect, the intermediation in various goods (intermédiation en biens divers) regime may apply. This triggers several pre-requisite requirements (such as being a legal person with a determined share capital, having a procedure to determine the profile of the target investors) and obligations (such as providing to investors clear, correct and non-misleading information in any marketing material information) to be complied with.
Finally, where none of above regimes apply to a specific issue of NFTs, the specific subsidiary regime relating to the issue of tokens may apply (articles L. 552-1 et seq. of the French Monetary and Financial Code). This optional regime provides that issuers can request from the AMF, on a voluntary basis, an authorisation (visa) to issue tokens. In such a case, the issuer must in particular provide the AMF with an information document relating to the implementation of procedures to comply with applicable regulations regarding AML/CFT and the monitoring and safeguarding of the issue proceeds. Like the regime on digital assets, the authorisation (visa) of the AMF is necessary for the issuer to carry out financial canvassing of tokens issuances (article L. 341-10, 6° of the French Monetary and Financial Code), to promote the issues of tokens by electronic means or to conduct sponsorship or patronage of tokens issues targeting French consumers (articles L. 222-16-1, b and L. 222-16-2, 3° of the French Consumer Code).
These abovementioned French law definitions and regimes are very likely to evolve by way of general EU legislation on cryptoassets (e.g the upcoming EU regulation on Markets in Crypto assets (“MiCA Regulation”)) or specific regulations, more particularly on NFTs. For instance, an amendment to the draft finance bill for 2022 included a definition of NFTs but was ultimately rejected by the French Parliament. In addition, following the collapse of FTX, the higher chamber of the French Parliament, the Senate (Sénat), recently adopted an amendment to a bill in order to make the optional PSAN license mandatory for any person not already registered with the AMF, as described above, as of 1 October 2023 and willing to provide any service on digital asset listed in article L. 54-10-2 of the French Monetary and Financial Code. Such amendment by the Senate, if confirmed by the French lower chamber of the Parliament, the National Assembly (Assemblée Nationale), would become effective as from 1 October 2023.