by David de Pariente, partner.
Since the adoption of Law 1.528 on July, 7 2022, the “digital investors” can rely on a dynamic and more detailed legal framework in Monaco.
This technical law is in line with the European legislations adopted recently and provides several definitions which are essential to its understanding.
For instance, the Law 1.528 defines:
The metaverse as “a persistent and synchronous platform creating one or more virtual and immersive spaces offering simultaneously products and online services to several users in the form of avatars, the latter being able to move and to interact socially and economically”. In this regard, it should be noted that any supply or operating of a metaverse representing a part of the Principality’s national heritage shall be subject to the granting of a prior approval from the State Minister.
The crypto assets as financial tokens (assimilated to financial instruments) or digital assets (virtual financial assets, usage tokens, and non-fungible tokens commonly referred to as NFTs).
In a nutshell, Law 1.528 introduces a series of conditions in relation to the provision of services on digital assets and the provision of investment services on crypto assets (I) and also clarifies the legal regime of the Initial Coin offerings (ICOs), as already set forth by Law 1.491 dated June 23 2020 and Sovereign Order 8.258 (II).
I. Conditions applicable to the provisions of services on crypto assets
Law 1.528 operates a distinction between the provisions of services on crypto assets which are necessarily subject to a prior approval from the State Minister, and the provisions of services on crypto assets subject to a prior approval from the Commission de Contrôle des Activités Financières (“CCAF”).
A mandatory prior approval for several provisions of services on crypto assets
A prior approval from the State Minister is required to operate the following activities in the Principality:
• Issuance of crypto assets ;
• Deposit or administration of crypto assets or access to crypto assets;
• Operating of a negotiation platform displaying sale and purchase interests to crypto assets;
• Transfer of digital assets with other digital assets, or with a legal tender;
• Operating of a negotiation platform of digital assets.
The prior said approval will only be delivered subject to certain conditions (i.e. registration of the service provider in Monaco, good reputation of the service provider’s managers, implementation of an AML/CTF procedure regarding the freezing of assets corresponding to the criteria of the Monegasque Financial Circuits Information and Control Service, etc.).
A prior approval from the CCAF for certain provisions of services on crypto assets
Obtaining a prior approval from the CCAF pursuant to the conditions set up by Law 1.338 of September 7, 2007 on financial activities, is required for the following activities:
• Investments in crypto assets;
• Execution of orders on crypto assets;
• Reception-transmission of orders on crypto assets;
• Advice on crypto assets.
An exemption from obtaining a prior approval is provided to the benefit of financial providers of services which are already authorized by the CCAF to perform such class of financial activities in Monaco, subject however to a prior information to the regulator.
II. Clarification of the legal regime applicable to ICOs in the Principality
As a reminder, an ICO (Inital Coin Offering) is defined as an “Offering of tokens consisting in a proposal to subscribe such tokens by any means whatsoever” (see Law 1.491 of July 23, 2020 and Sovereign Order 8.258). These fundraising transactions dedicated to companies registered in Monaco or in the process of being incorporated in Monaco are subject to a prior administrative approval issued by the State Minister, whether they qualify as public or private.
The private nature of the ICOs involving tokens is subject to at least one of the following criteria:
• Offer targeting qualified investors only;
• Offer targeting less than 150 non-qualified investors;
• Offer targeting investors who purchase tokens for a total price of at least EUR 100,000;
• Offering of tokens with a nominal value of at least EUR 100,000 per token.
It should be noted that when the prior approval concerns a token with a unit nominal value of at least EUR 100,000, such an approval takes the form of a label/certification issued after examination of:
• Information provided on the issuer and the project sponsors;
• A summary note;
• A «white paper» to the investors’ attention;
• The terms and conditions for the deposit of the investor’s funds in escrow.
Law 1.528 of 7 July 2022 provides that the offer of tokens cannot concern non-fungible tokens, and that when the ICO targets the public, the offer of tokens cannot be done with financial tokens. Furthermore, it is specified that the issuer shall determine the nature of the token and its related rights, the nature of the issuance (either public or private), or the nominal value of a token.
Gordon S. Blair’s expertise in Cryptoassets
Gordon S. Blair Law Offices (Monaco) assists various actors involved in the crypto assets sector, in particular in the context of their relocation or installation in the Principality. The firm also assists banking and financial entities in this regard.