Law No. 1.528 of 7 July 2022 amending various digital provisions and regulating the activities of service providers on digital assets or crypto-assets

Law No. 1,528 of 7 July 2022 amending various digital provisions and regulating the activities of service providers on digital assets or crypto-assets (45 articles) (JDM No. 8600 of 22 July 2022), is derived from Government Bill No. 995 on blockchain technology (itself derived from the transformation of Parliament Bill No. 237) received on 4 June 2019 by the National Council and passed on 30 June 2022.

Purpose of Law No. 1.528:

This new legislation is part of the Principality’s digital transition and the Extended Monaco programme, and aims to create a dynamic ecosystem around blockchain.

The main purpose of Law No. 1.528 is to regulate services on digital assets and services on crypto-assets, with a licensing regime for providers who intend to offer these activities in Monaco.

It is in addition to the existing legal framework for digital matters, namely the Framework Law 1.383 of 2 August 2011 for a digital Principality, as amended, and Law 1.491 of 23 June 2020 on token offerings.

This will be completed. The draft law 1039 on the use of a digital registration device on a shared register by public limited companies and limited liability companies is being studied, and in parallel work is carried out on the issue of the dematerialisation of financial instruments which is not yet enshrined in Monegasque law.

Sources of inspiration for Law No. 1.528:

The Monegasque legislator has in some respects moved closer to French law. E.g. definition of "token"; regime for the regulation of services on digital assets in the PACTE Law ("Plan d’Action pour la Croissance et la Transformation de l’Entreprise", "Action Plan for Growth and Transformation of the Enterprise") published in the JORF on 23 May 2019.

It has also been attentive to the related work carried out at European level, namely: Proposal for a Regulation on crypto-asset markets [MiCA Markets in crypto-assets] approved on 14 March 2022 by the European Parliament's Committee on Economic and Monetary Affairs (ECON) ; Regulation (EU) 2022/858 of the European Parliament and of the Council of 30 May 2022 on a pilot scheme for market infrastructures based on distributed ledger technology applicable from 23 March 2023; Regulation (EU) 2022/868 of 30 May 2022 on European data governance applicable from 24 September 2023.

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SUMMARY

Law No. 1.528 contains two types of provisions:

1) For the most part, the provisions of Law No. 1.528 establish a secure and risk-limiting framework for the exploitation of the opportunities offered by the digital finance sector. [TITLE II, Articles 10 to 40]

Law No. 1.528 thus regulates digital asset services and crypto-asset services, with a licensing regime for service providers intending to offer these activities (agrément) issued either by the Minister of State or by the CCAF, and reserved in all cases to companies registered in Monaco.

Companies established abroad are prohibited from making unsolicited advertising approaches to Monegasque residents for the provision of services on digital assets or crypto-assets.

Failure to comply with these regulations by providers of services on digital assets or crypto-assets is subject to administrative and criminal sanctions.

2) In parallel, Law No. 1.528 contains amending provisions to other related laws [TITLE I, Articles 1 to 9; TITLE III, Articles 41 to 45], namely:

— Amendment of Law No 1.362 of 3 August 2009 on the fight against money laundering, terrorist financing and corruption, as amended:

Service providers of digital assets or crypto-assets are subject as a whole to compliance with the regulations on the fight against money laundering, terrorist financing and corruption, taking into account the FATF Guidelines on the risk-based approach to virtual assets and service providers related to virtual assets.

— Amendment of Law No. 1.383 of 2 August 2011 for a digital Principality, as amended:

The definitions contained in Law No. 1.383 are updated so that they are closer to the more commonly accepted notions today and are of a nature to facilitate the understanding of this complex matter. For example: replacement of the notion of “digital recording device on a shared registry” by the more familiar notion of “distributed registry technology“; adjustment of the general definition of “token“, and definition of “utility token“, “security token“.

Account has also been taken of the new potentialities of the digital sector paving the way for the transformation of the online space, by introducing the notions of “non-fungible token” (NFT) and, as a precursor, of “Avatar” and “Metaverse“.

The supply and use of a metaverse comprising a representation of the Principality of Monaco or allowing the identification of any elements of its national heritage will be subject to prior administrative authorisation issued by the Minister of State, under the conditions laid down by Sovereign Order.

— Amendment of Law No. 1.491 of 23 June 2020 on token offerings (“offres de jetons”: ICO-STO):

The issuer is now allowed to freely set the unit nominal value of the token, previously set at €10,000 by Sovereign Order 8.258 of 18 September 2020.

— Amendment of Law No. 1.221 of 9 November 1999 fixing stamp duties:

Finally, the dematerialised tax stamp is established, in order to achieve the complete dematerialisation of certain teleservices.

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The legislator has already pointed out that these provisions are far from intangible. They will be reviewed periodically, in line with technological developments and practice, in order to better understand the issues raised by the law, both for economic players in the digital sector and for users/consumers.