French Financial Markets Authority (AMF) has proposed a regulatory sandbox for all of Europe to support the emerging security token industry.
The “Digital Lab” would run for three years, the watchdog said in a legal analysis on March 6, exempting projects from financial regulations such as the MiFID and CSDR that the analysis by AMF was found to be incompatible with the growth of the blockchain sector.
AMF President Robert Ophèle said in a speech, “These frameworks were designed to frame centralized market infrastructures”. He explained that “they are not suited to the decentralized nature of the blockchain environment” and thus make many projects almost certainly unprofitable.
Europe Can’t Adopt Blockchain Regulations Overnight
But Ophèle insisted Europe couldn’t just adopt new blockchain and security tokens regulations overnight.
“We are faced with a ‘chicken and egg’ paradox,” Ophèle said. The space cannot develop under the current framework, but without documentation, new frameworks cannot evolve either.
A sandbox for the Digital Lab would give regulators both, Ophèle said. Authorities would closely monitor how these projects evolve when unhampered by the traditional regulation of European markets, gathering three years of feedback and data to shape the formation of new, more flexible regulations.
“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,” Ophèle said.
The proposal comes from Europe’s most reliable financial regulators that are pro-blockchain. For years, AMF has consistently advocated a forward-thinking approach to blockchain and distributed ledger technology, approving initial coin offerings, drafting blockchain bills, and releasing experimental frameworks to regulate themselves for crypto firms.
How other continental financial regulators will respond to the AMF’s latest recommendation remains to be seen. The press offices for the respective securities regulators of Germany, Italy, Austria, Ireland and Finland did not respond to requests for comment immediately and neither did the European Securities and Markets Authority, the EU’s top securities watchdog.