The AMF publishes a discussion paper on Decentralised Finance (DeFi)
Executive Summary
The Autorité des Marchés Financiers (AMF), France's financial markets regulator, published a discussion paper on June 19, 2023, outlining preliminary thoughts on regulatory challenges posed by Decentralised Finance (DeFi) activities on crypto-assets, inviting stakeholder feedback by September 30, 2023. A summary of responses was released on July 10, 2024, highlighting key themes like defining DeFi, distinguishing protocol types, and applying a "same activity, same risk, same regulation" principle. This matters for compliance professionals as it signals AMF's intent to develop proportionate DeFi oversight, balancing innovation with investor protection, AML/CTF risks, and market integrity amid evolving EU frameworks like MiCA. #
What Changed
- This is a discussion paper and consultation, not binding legislation, so no immediate regulatory changes or requirements are imposed. Key discussion points include:
- Defining DeFi based on decentralization criteria (e.g., automation, network architecture, governance, lack of single points of failure).
- Distinguishing permissioned vs. permissionless protocols and public vs. private blockchains.
- Regulatory approaches to smart contracts (e.g., certification, varying responsibilities), open-source code, and governance.
- Adopting IOSCO recommendations: identify responsible persons (developers, DAOs), enforce risk management, disclosures, conflict-of-interest mitigation, and applicable laws.
- Proportionate regulation emphasizing "same activity, same risk, same regulation," addressing risks like price manipulation, liquidity issues, pseudonymity-enabled AML/CTF, and KYC gaps. The AMF advocates global coordination for a level playing field.
Suggested Considerations
- Submit feedback (past deadline): Stakeholders could contribute by September 30, 2023, to innovation@amf-france.org.
- Monitor developments: Track AMF/ACPR follow-ups, including smart contract certification discussions.
- Conduct internal assessments: Analyze DeFi exposures using IOSCO criteria—identify responsible persons, risks (operational, AML/CTF), interconnections with TradFi, and ensure disclosures/conflict management.
- Enhance compliance programs: Prepare for proportionate rules on governance, cybersecurity, solvency, transparency; align with "same risk, same regulation" for DeFi-like activities.
- Engage stakeholders: Participate in AMF ecosystem dialogues at French/EU/international levels.
Key Dates
Compliance Impact
Urgency: Medium – This is non-binding consultation feedback without hard deadlines or rules, but it previews AMF's regulatory trajectory toward DeFi oversight, including AML/CTF enforcement and investor safeguards, amid MiCA rollout. It matters because DeFi's growth amplifies risks like pseudonymity-driven financial crime and market abuse, potentially triggering enforcement of existing laws; firms
Who is Affected
References
AI-generated analysis. May contain errors or omissions — verify with the original AMF source before acting. Full disclaimer.
Summary
Crypto-assets Innovation Fintech Journalists The AMF publishes a discussion paper on Decentralised Finance (DeFi)