Crypto Derivatives Come Under Mifid II Regulation, Says French Watchdog

The Autorité des marchés financiers (AMF), the French financial supervisory authority, has said that cryptocurrency derivatives requires authorization and that these products must not be advertised via electronic means.

In its statement, the AMF said that following an analysis of the legal qualification of cryptocurrency derivatives, they have reached the conclusion that platforms which offer these products must abide by the authorization and business conduct rules.
“The recent cryptocurrency boom has spurred several online trading platforms to offer binary options and cryptocurrency contracts for difference (CFD),” the AMF said. “Such contracts allow investors to bet on a cryptocurrency’s rise or fall, without holding the underlying.”

The regulator said the notion of “derivative” is not defined in EU legislation per se. Within the Markets in Financial Instruments Directive (MFID) framework, EU lawmakers only set out a list of derivatives (such as options, futures, swaps or forwards), followed by a list of eligible underlyings. The AMF concludes that a cash-settled cryptocurrency contract may qualify as a derivative, irrespective of the legal qualification of a cryptocurrency.

“Online platforms which offer cryptocurrency derivatives fall within the scope of MiFID 2 and must therefore comply with the authorization, conduct of business rules, and the EMIR trade reporting obligation to a trade repository,” the regulator said. “Above all, these products are subject to the provisions of the Sapin 2 law, and notably the ban of advertisements for certain financial contracts.”

Other EU regulatory bodies have also been looking into the issue of crypto derivatives. The European Securities and Markets Authority (ESMA) announced last month that it was looking into how crypto CFDs would comply with their MFID regulatory framework.

In December, France finance minister Bruno Le Maire proposed that the subject of crypto regulation be discussed at the G20 summit in April, and shortly after that Le Maire set up a work group to examine the possibility of regulating cryptocurrency in France.

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