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European regulation update: blockchain
European regulation update: blockchain
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European regulation update: blockchain

20/02/2018

Focus on the latest European regulatory developments as of February 2018

The Blockchain ordinance in France

Blockchain is a transparent and secure information storage and transmission technology that functions without the information being passed onto a trusted third party.  A blockchain contains the history of all the exchanges made between its users since its creation. The information contained in the blockchain is secure and distributed: it is shared by its different users, with no intermediary, thereby enabling each participant to check the validity of the chain.

Published on 9 December 2017, ordinance no. 2017-1674 (in French) of 8 December 2017 relative to use of a "shared electronic recording system" for representation and transmission of financial securities, or the Blockchain ordinance, made France the first country to adapt its legal framework to blockchain.

The ordinance aims to facilitate the exchange of certain financial securities (excluding listed securities that come under European law) using this new technology by authorising registration of the issue or the disposal of financial securities in a blockchain.

Transfer of securities ownership was so far only materialised by the inscription of the securities or fund units in their owner’s securities account. From now on, the transfer of ownership of unlisted securities, marketable securities (treasury bills, deposit certificates) and fund units, will also be possible via a blockchain.

The “shared electronic recording system”

Updating the legal framework to the “shared electronic recording system” (official term used in the ordinance in order to respect the principle of technical neutrality) was much anticipated. Crowdfunding specialists such as fund managers welcomed the initiative since the technology means they can avoid using still cumbersome and costly record keeping systems. Meanwhile, asset management is one of the finance areas with the most intermediaries. Blockchain offers promises of significant cost reductions as well as massive efficiency gains.

The French minister of the economy, Bruno Le Maire underscored all of the challenges of the Blockchain ordinance, pointing out that the “use of this technology will allow FinTechs and other financial actors to develop new solutions in securities trading that are faster, cheaper, more transparent and safer”.

The ordinance is to take effect on the date planned for the application decree, at the latest on 1 July 2018. Between now and then, the application decree is to be drawn up and as indicated by the Treasury: “Blockchain presents attractive features in terms of its unfalsifiable nature, traceability and authentication. The main challenge now is to establish the exact requirements in the application decrees”.

To read more:

European regulation update: fintech and blockchain

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