Autorité des Marchés Financiers (AMF), France’s financial markets regulator, has issued an updated statement warning against the increasing risks of fraudulent schemes associated with cryptocurrencies.

The 2018 Markets and Risk Outlook document, an annual financial industry risk assessment report published by the French regulator, states that there is currently not enough reliable information available regarding the potential risks involved in crypto-related investments.

The AMF’s 105-page report, which covers numerous aspects of financial risks, notes that:

“the emergence of investment offers on crypto-assets, such as Bitcoin, [has led to] fraudulent players …shift[ing] their focus to this trendy asset…the current legal and regulatory framework is not adapted to these new products, which strongly constrains the AMF’s ability to act.”

In addition to warning French citizens about crypto fraud, the French regulatory authority has cracked down on illegal online forex trading businesses and binary options.

According to the AMF, the latest scams also include fraudulent “investment diamonds” schemes.

Cryptos “Not Covered By Legal Definition” Of Currencies

In order to prevent these scams from spreading, the regulator is reportedly using proprietary tools developed by Sapin II, an “anti-corruption” legal framework enforced in France since June 1st, 2017. However, the AMF stresses that cryptocurrencies “are not [yet] covered by the legal definition of a currency or even, in most cases to date, a financial instrument under French law.”

The report asserts that France’s authorities might therefore not be fully “competent” at this time to deal with risks stemming from acquiring crypto assets.

Although crypto regulations might not have been adequately developed at this point, the AMF did conduct an “in-depth legal analysis” on crypto asset derivatives. The analysis, according to the regulator, led to the conclusion that certain types of cryptocurrency investments can be considered “financial contracts.” This means that they should be regulated in the same way that the country’s authorities regulate similar “financial instruments”, the risk assessment report concludes.

Moreover, the AMF requires that these types of crypto investments should comply with France’s Monetary and Financial Code, which addresses matters related to “approval, good conduct, and the ban on advertising.”

Most Crypto Tokens Don’t Qualify As “Financial Instruments”

The French regulator further notes that crypto tokens, which have some sort of additional utility other than monetary value, “can be highly variable from one transaction to another.”

Due to the speculative nature of crypto tokens, their “initial valuation” during what is typically referred to as the pre-ICO (initial coin offering) phase is “questionable”, the AMF states.

Given these attributes of crypto tokens, they are typically not classified as “financial instruments in France”, according to the country’s current financial markets rules and regulations.

The AMF nonetheless does require that it must review and approve any advertising material related to “the promise of a return” or a “buy-back option” given to investors by the issuer of a crypto token.

The regulator also mentions that “the intermediation in miscellaneous assets” clause is usually applicable in such offerings, but presently a number of ICOs and certain transactions involving crypto assets are still “outside the scope of regulation.”

In order to bring more clarity to France’s crypto industry and offer better investor protection, the AMF is reportedly working on drafting regulations that are more “specific to ICOs” while not stifling innovation.