France clamps down on crypto bets, banning online ads

France’s financial regulator has said that financial products based on cryptocurrencies should be formally regulated as derivatives, meaning online trading platforms will need authorisation to offer them and can no longer advertise them online.

In one of the first moves of its kind by an EU regulator, the Autorité des Marchés Financiers said on Thursday that it considered complex financial contracts that allow investors to bet on the price movements of a cryptocurrency without actually holding the underlying as, legally speaking, derivatives.

This comes even though the legal qualification of cryptocurrencies themselves remain a legal grey area, with little guidance to date from global regulators as to whether they should be classified as an asset - be that a currency or commodity, for example. Recommended Switzerland sets out guidelines to support initial coin offerings UK crypto companies link up for self-regulation Hong Kong regulator issues cryptocurrencies warning

Online trading platforms in France would need authorisation to offer crypto-derivatives products under Europe’s Mifid II financial regulation, the AMF said, and would have to abide by rules around business conduct and trade reporting. The regulator added that this classification meant the online advertising of crypto-derivatives was banned.

“The AMF concludes that a cash-settled cryptocurrency contract may qualify as a derivative, irrespective of the legal qualification of a cryptocurrency,” it said. “Platforms which offer these products must abide by the authorisation and business conduct rules…[and they] must not be advertised via electronic means.”

The news may come as a blow to the numerous brokers that have raced in recent months to offer binary options, contracts-for-difference and rolling spot forex products based on cryptocurrencies to clients, in many cases with high levels of leverage. Amateur traders have latched on to soaring crypto prices in what many have warned may be a speculative bubble.

The decision could also set a precedent as other regulators circle the cryptocurrency space. Both the UK and EU regulators have warned on the “high risks” associated with the crypto-CFDs in recent months, noting the extreme volatility of the underlying cryptocurrencies. The European Securities and Markets Authority is currently considering whether to ban crypto-CFDs altogether.

More broadly, regulators are still establishing their approach to digital currencies proper. Separately on Thursday, the UK government announced it was launching an inquiry into the “opportunities and risks” around cryptocurrencies, with a view to establishing how to regulate the technology in future.

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