Monaco votes an unprecedented legislative framework for cryptocurrency fundraisers

The Bill n°1009 of 10 March 2020 passed by the National Council on Tuesday 16 June marks a new step for the Principality in crypto-assets.

• Similar to the French Pact Law, whose obtaining the visa would be replaced here by that of a label, the law n ° 1009 of March 10, 2020 voted on June 16, 2020 establishes a legal framework for the raising of funds by emission tokens (Initial Coin Offering or ICO) in the Principality.

• Whether private or public, the Principality emphasizes two key points: the legal framework of ICOs must be aimed at protecting savvy and unsuspecting investors, and combating money laundering, and financing terrorism applicable in Monaco.

• Encouraging application conditions for investors, which probably precede other upcoming regulations on digital asset service providers (DASP) and digital security – sand-boxes.

This new bill is part of the digital transition policy desired by SAS Prince Albert II embodied in particular by the Extended Monaco programme.

“Monaco in a digital world is an opportunity to start a new cycle of prosperity by boosting our economic areas of excellence but also by creating new growth drivers”

SAS le Prince Albert II

In his introductory speech on Bill n°1009, Philippe Mouly stresses Monaco’s economic ambition to move towards digital:

“Making digital a lever for growth, an opportunity for Monaco to start a new cycle of development, giving Monegasque companies a framework conducive to mastering all the potential of digital technology through a suitable legislative framework, were the objectives of Law n° 1482 of 17 December 2019 for a digital principality.”

Philippe Mouly – Secretary General – National Council of Monaco

The objectives of this bill were pursued under Blockchain Technology Bill n°995 ; “However, this new bill was built with a new scope redefined and a refined ambition: the one of being now specifically focused on financing companies and being exclusively dedicated to fundraising using shared register technology such as blockchain”

The Principality wanted to provide a strict and secure framework for all users of this technology, as Philippe Mouly explains, “the lack of real guarantee offered to token subscribers is a source of concern that could ultimately threaten the development of these operations.”

In order to secure this new way of financing companies in Monaco in the long term, the princely government has therefore wished to establish a legal framework to protect investors who may wish to participate in such transactions initiated by Companies based in Monaco by providing them with quality information, and on the other hand to foster the development of societies in these new and complex areas.

In fact, this bill provides that ICO be subject to mandatory administrative authorization issued by the Minister of State in the form of a label.

Article 2 of Law n°1009 “The completion of an ICO is conditional on obtaining prior administrative authorization in the form of a label under conditions specified by sovereign ordinance”

Article 3 of Law n°1009 “only a Legal Person registered in Monaco can make an ICO, however the application for a label may be submitted to a company being formed in Monaco. When tokens have the characteristics of financial instruments, the offer can only be made by a joint stock company.”

The National Council affirms its belief that Monaco has a role to play, and that the vote on this new law adds an additional brick to this construction of the digital laws already passed

“In the difficult context of the world and the world economy, and that of Monaco, which is not spared, it is all the more essential that together we are trying to find new wealth that will also produce new revenue.”

Stephane Valeri – President of the National Council of Monaco

Jean Castellini, Minister of Finance and Economics, addressing Franck Julien, President of the Commission for Digital Development, recalls that the challenges of this bill were to symbiotize the fields of legality with that of technology and finance. A project that required close collaboration between the various Monegasque institutions in order to arrive at a law specifically dedicated to initial coin offering.

“This text is a decisive step in the development of operations important to the Monegasque economy, especially in this complicated period, including creating jobs and generating new revenue for the state.”

Jean Castellini – Minister of Finance and Economics

It was essential for the government to ensure that the various operators involved in the blockchain’s fundraising comply with international anti-money laundering and terrorist financing standards applicable in Monaco in accordance with Law n°1362 of 03 August 2009 relating to the fight against money laundering, the financing of terrorism and corruption. This bill therefore pursues two main objectives, namely the fight against money laundering and terrorism, and the protection of investors by providing that investors can at least be informed of the conditions of the resale of these tokens.

This point, which was discussed at length during the discussions of the joint working group, is expected to follow up on the Proposal of the National Council to provide for the organisation of a secondary market that will be implemented by the creation of a token exchange platform in Monaco.

As these rules are still non-existent in the principality, Jean Castellini opens a possible avenue of negotiation through platforms. “This is the preferred path right now. Consideration is under way on the use of the billboard system”

While welcoming the boldness and relevance of the government’s position in the field of digital and crypto-assets, Franck Julien stressed the importance of considering separate texts on the new activities of digital asset services provider (DASP), which it considers to have a major economic impact and significantly greater business volume than those generated by the ICOs.

Indeed, if ICO allows the development of technological projects, the DASP covers a very wide range of intermediation services in the cryptocurrency sector that would open up prospects for a financial centre like Monaco.

Article: Joana Foglia