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France Shifts Views on DLT, Becoming №1 Startup Home in Europe

Denis Goncharenko

France, or the French Republic, is a transcontinental state with a great history, having been located in the center of political, economic and social events in Europe and the whole world for centuries. The state system is a unitary republic of a presidential type with the constitution as a main law.

Since the 1950s, France is one of the states participating in the creation of the European Union; today it plays a direct role in determining its policies. Concerning external policy, France declares to be a global ideological leader and human rights’ defender. Moreover, the country is a cultural center for the entire world. The republic also plays a special role of the leader with the respect to the African states.

There are UNESCO headquarters (in Paris), the Organization for Economic Cooperation and Development (OECD) (in Paris), Interpol (in Lyon) and the International Bureau of Weights and Measures (BIPM) (in Sèvres) situated in France. The country is a member of many world and regional international organizations.

Some facts about the French economy:

  • According to the total volume of the economy, the country takes the second place in the European Union and it is one of the world top ten countries. In 2016, France was recognized as the 6th economically developed country in the world along with the United States, China, Japan, Germany and the Netherlands.

  • Its economy is dominated by the service sector, which employs 76.7% of the economically active population, and the secondary sector accounts for 20.5%.

  • The biggest part of GDP is provided by the industrial production — 20%; it provides more than 30% of jobs, 40% of investment, 80% of exports. However, the industry of France is characterized by a tendency to reduce the labour force from 5.5 million in 1978 to 3.9 million in 2003.

  • A feature of the French economy, which is considered to be a weakness at the same time, is a large (up to 57% in 2016) share of the public sector.

  • An external debt (over 90% of GDP in 2013, 98.9% in 2017) is stated to be a significant vulnerability of the French economy.

Development of the IT sector. Macron significantly boosts the policy changes

Until recently, France wasn’t so eager to be among the technological leaders. Nevertheless, in 2011, Plan France Numérique 2012-2020: Bilan et Perspectives, the Strategy for digital development, was published. Since then, the government has doubled its efforts to support the use of IT technologies on a national scale. The development took a new turn with the presidency of Emmanuel Macron, who headed for dominance in the high-tech sphere. Before assuming the presidency, Macron was an investment banker, and also the minister of economics, industry and the digital sector. He understands the importance of technology in the future digital economy.

A young and technocratic president wants to lower the capital gains tax, which should lead to the increase of investments. Moreover, Macron has implemented a Technology Visa for startup founders, hired employees and investors. In order to obtain a visa as a startup founder, you need to get into one of the 38 incubators or accelerators and achieve a minimum capitalization (about $ 22,000).

In addition to recruiting experts from outside, France raises its own: there are such reputed universities as Ecole Polytechnique, CentraleSupelec and Paris Saclay University. Some programming schools, like Ecole 42 and Holberton School, are currently under active development. Apart from the standard education, students participate in entrepreneurship programs. In 2016, they launched more than 100 startups. In 2017, France launched Station F— the world's largest start-up center.

The system of investing in projects has actively been developing now. According to Tech.EU, in 2016 France was the leader in Europe in the number of startups and the third largest in terms of raised funds volume. In 2016, 227 transactions were completed with amounts above € 1 million and one transaction larger than € 150 million.

But it’s not enough for Macron: in the interview with Wired in March 2018, the French president outlined his plans to become the leader in the development of artificial intelligence. 1.5 billion euros have been allocated for it. In this initiative, Macron strives to gain support from the entire EU and Germany in particular.

Key milestones of the French crypto industry development

December 2017. France declared its intention to allow the use of blockchain for trading the unlisted securities.

March 2018. The Minister of Economy Bruno LE MAIRE addressed the G20 summit, appealing to consider blockchain and cryptos and to take the issues of this sector regulation seriously.

On March 17, the AMF (financial regulator of the country) said about the intention of preparing a legislative framework for ICO regulating.

April 2018. The French government reduced the tax on cryptos from 45% to 19%, recognised them as "movable property", which made French crypto-enthusiasts rejoice.

May 2018. IBM announced its intention to create 1800 jobs in France to work in the field of blockchain, artificial intelligence and the Internet of things.

June 2018. The first version of the ICO regulation document was developed. It was presented in the Council of Ministers.

July 5, 2018. Jean-Pierre LANDAU, also known as "Monsieur Bitcoin," published a report, where he stated about no need to regulate the industry.

September 12, 2018. AMF published the final version of the document on ICO regulating; this document authorizes AMF to issue licenses/visas to the companies dealing with this activity. Bruno Le MAIRE declared about government adoption of this regulatory framework.

The same month, the world-famous football club Pari-Saint Germain announced the possible release of its own token, and UNICEF France began to accept donations in cryptos.

The main thesis of ICO regulation framework

The presented legal framework defines tokens. This document also specifies full powers of the Authorité des Marchés Financiers (AMF) to issue visas (licenses) on crowdfunding activities with their use. ICO operators must provide investors with  fully transparent and accessible data by means of publishing documents.

ICO operators must also ensure investors provide full transparency of relevant ICO and issuer information via published documents. These documents must provide "accurate, clear and non-misleading content which helps to understand the risks associated with the offer."

The White Paper for approval by AMF

It must include specific details and guarantees for investors in order to be granted a visa:

  • A description of the project related to the ICO and its roadmap;

  • The rights conferred by the token;

  • The legislative court in the case of disputes;

  • The economic purpose and use of funds collected during the ICO.

AMF authorities according to the legal framework

  • The AMF is examining the documents prepared by token issuers (‘white paper’) and can issue the visa or deny the issue.

  • The AMF may require issuers to acquire the status of a legal person established or registered in France.

  • The AMF can set up a mechanism for sequestering the funds raised, or any tool having equivalent effect, and a device for identifying and customer knowledge.

The framework guarantees ICOs that have gained AMF approval the right to open conventional bank accounts in order to protect investor funds and facilitate investor services. Additionally, the amendment 1862 removes the restriction, allowing institutional investors to have 10%-20% or more of their portfolio just in tokens that have acquired the AMF license. Previously, they were unable to invest in ICOs according to rules governing such professional entities — they could place only 10% into assets such as gold, oil, other commodities or cryptos.

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