Breaking: AMF Bans Crypto Derivatives, Forcing CFDs Brokers to Seek Approval

The French Autorité des Marches Financiers (AMF) has outlined that it is prohibiting the advertising and distribution of cryptocurrency derivatives. The regulator has just published a stark warning to CFDs brokers that are offering the products that they are in violation of the Sapin 2 Law introduced last year.

According to the AMF, the legal qualification of cryptocurrency derivatives demands that brokers that are offering such products must comply with a set of regulations. The firms must seek approval from the regulator prior to offering such contracts and adhere to good conduct. Brokers are strictly prohibited from providing derivatives on cryptos and the products should not be advertised.

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The French regulator outlines that the crypto-craze led to an implosion of binary options and CFDs offerings from forex brokers. The contracts allow to bet on the rise or fall of a cryptocurrency without holding the underlying asset.

Legal Reasoning

The decision of the AMF was taken after thorough legal analysis of derivatives contracts on cryptocurrencies. The legislative reasoning that the French regulator uses in its announcement highlights that to qualify legally, a derivative product needs to take into account the assessment of whether a cryptocurrency can be considered as an underlying asset that is eligible under the texts of MiFID.

Under the existing European regulatory framework, the AMF states that derivative products are limited by the legislative definition for underlying assets.

The regulator considers that a cryptocurrency contract settled via a cash settlement can be considered as a financial contract, only after approval, good conduct and the reporting of transactions to a central repository under the EMIR European regulation.