Translated from the original in French.
Wishing to adopt “a pioneering strategy (…) in terms of financial innovation and digital finance”, France has authorized, by two orders issued on April 28, 2016 and December 9, 2017, the use, in certain cases, of “shared electronic recording devices (“DEEP”)”, i.e., “blockchains”, for the registration of transactions relating to “minibonds” and unlisted financial securities.
The French Government considers that the term “DEEP” covers the main characteristics of “what is known as blockchain technology”, that is to say, according to the Government, “its use as a register and its shared character”, but that the term remains “broad and neutral with regard to [methods and processes] so as not to exclude further technological developments”.
The implementation of the aforementioned orders requires the publication of corresponding decrees.
In this regard, the order of April 28, 2016 allows the registration of the issue and sale of “minibonds” in a DEEP “under conditions, particular of security, defined by decree in Council of State”.
As for the order of December 9, 2017, it allows the registration, under conditions set by decree in Council of State, of unlisted financial securities in a DEEP which “provides guarantees, particularly as regards authentication, that are at least equivalent to [the guarantees provided by] registration in a securities account “.
Since the provisions of the order of December 9, 2017 come into force “with the publication of the decree (…) and, at the latest, on July 1, 2018”, France will soon publish the decrees which will specify, in a concrete way, what it means by the term “DEEP”.
Depending on the regulations adopted:
– either the term “DEEP”, although used to refer to what is known as “blockchain” technology, would in reality be only be a synonym for the term “database”;
– or the term “DEEP” would refer to a database whose full and up-to-date copy is held by several actors, and whose immutable character is the consequence of an algorithm which, on the one hand, establishes a system of incentives necessary for the maintenance, by adversaries, of the same data history and on the other hand, makes the cost of the alteration of this data prohibitive.
If the term “blockchain” was initially supposed to correspond to the latter case, experience shows us that this case does not cover all the so-called blockchains created since 2009, but only covers public blockchains having a monetary purpose such as the bitcoin blockchain.
Yet, several national governments continue to praise the potential of what is known as “blockchain” technology, while criticizing virtual currencies, which are, to date, the only successful applications of this technology.
What will France choose? Unless it defines from scratch the technical parameters of an operational blockchain having no monetary purpose, a regulation that refuses to include public blockchains such as bitcoin under the category of DEEPs would only modify French law to include a special category of databases used for the processing of “minibonds” and unlisted financial securities. Such regulation, which would not allow economic actors to reap the benefits of using a true blockchain, is bound to be a failure.
Such an approach would be all the more disappointing as France is a pioneer in the field of public blockchains having a monetary purpose and boasts of first-rate economic players in the sector, such as the hardware manufacturer Ledger.
In any case, the task of the Government is not easy. In addition to the technical conditions relating to the registration, by use of a technology that is not very mature, of operations relating to “minibonds” and financial securities, the decree must also specify the manner in which financial securities registered in a DEEP can be used as a pledge. This would imply the intervention of a trusted third party or the implementation of complex authentication procedures in the context of the operations contemplated by the order of 9 December 2017.