France’s Financial Markets Authority (AMF), proposed a regulatory sandbox to study the impact of security tokens in the European Union.
On 6 March the AMF proposed a European “Digital Lab” regulatory sandbox that would allow local regulators to set security settlements requirements aside with the hope that this will help develop a security token market infrastructure with a secure legal environment. The sandbox will allow Security Token Offerings (STOs) to be investigated and the broader concept of blockchain-based financial instruments.
Nick Cowan, CEO and Founder of the GSX group said:
The news coming from the French regulatory authority is a welcomed and promising step, fostering greater recognition to the many tangible benefits tokenised securities offer financial markets.
Real-time settlement reduces costs and counterparty risk whilst releasing capital and opening up country interoperability opportunities and counter-party risks – some of the key takeaways that we at GSX Group are pushing everyday with our Smart Securities, evolving legacy systems towards efficiencies, in turn strengthened by a European wide sandbox regulatory regime.
One of the legal hurdles against the adoption of blockchain technology in finance is its decentralized nature. According AMF, security token trading could be subject to current regulation and platforms may provide investment services if they apply for authorization. Moreover, tading platforms would also need a multilateral trading facility or organized trading facility authorization which excludes decentralized platforms.
Another point the AMF makes for the settlement of security tokens is that current regulations do not allow full settlements on blockchain. Thus, a platform listing security tokens has to either to go through an intermediary with central depository approval or get approval itself.
AMF Chairman Robert Ophèle said in his speech on 6 March that not taking steps towards regulation on security tokens is stifling innovation.
A member of the US Securities and Exchange Commission, Hester Peirce, had a similar address to the agency, stating that the conservative and contrary of the SEC towards Bitcoin-related products stands in the way of innovation and may drive entrepreneurs away along with the opportunities they create.