Les Amis d’Ethereum France #10 avec l'ADAN — Réglementation de la DeFi et DAOs

Today we're going to talk about regulation, specifically the regulation of Decentralized Finance Initiatives (DFIs) and Digital Asset Operations (DAOs) in France and Europe. The discussions will begin with an introduction from Adan, providing a brief overview of decentralized finance regulations in Europe. Then we'll open up to a fairly open discussion with several experts on the subject of DAO regulation in France. This will be a short 15-minute introduction from Adan, followed by a roundtable discussion of about half an hour. We'll conclude the event with a small cocktail reception for informal discussions among ourselves on the topic.

As a brief introduction, the association will present the future of DFI regulation. This presentation will be given by Faustine Fleuret, President and CEO of DANE, and myself, Hugo Bordet, who is responsible for regulatory affairs at the association. Before presenting this regulatory timeline, perhaps I could briefly explain what DANE is for those who don't know Faustine. After you, hello everyone, and thank you for braving the strikes and tear gas to come and talk about regulation. We must commend your perseverance and thank you very much to Comette for hosting us today for this Meetup on DFI and DAO regulations.

And thank you in advance to our speakers from earlier who will be able to delve deeper into this rather general introduction to DFI, what DAF does, and what we will have to do in the coming years, including a presentation of the schedule that awaits you and how you will be involved. But for those who don't know the association, the Association for the Development of Digital Assets (ADFA), we are a professional association whose goal is to unite, represent, and amplify the voice of the companies that are building the new Web 3 economy, of which DFI is actually a part. To this end, we have several missions to help this economy develop. First, to raise awareness, because in reality, we know a little about crypto-assets, sometimes only Bitcoin, but on the institutional and regulatory side, there is a real need to understand the real economy and the opportunities behind it, to see companies develop. So, we have a mission to put you in touch with them.

The value of promoting you and raising your profile with these stakeholders lies in removing all the obstacles to your development, particularly those posed by industries that aren't necessarily thrilled to see you grow. There are long-standing problems, including banking, investment opportunities, the development of insurance products, and new activities, among others. The pillar that will interest us today in the association's mission is our participation in regulatory debates, in a timeframe that allows us to create and support the development of the most suitable and appropriate regulatory framework possible. Finally, and this underlies all of these missions, we do a great deal of educational work, as we are doing today, with all the stakeholders who will need it— all the parties involved in these regulatory debates and your development needs, whether from the private or public sector. So, this keeps the entire association team busy, and we represent many different players, including...

DIFA and decentralized finance actors, and we want to use this quick introduction to present the regulatory calendar: what has happened, what is happening, and what will happen, which will concern DeFi actors. It's important that you are informed and, above all, that you are involved in these discussions and consulted, particularly through the voice of the association. So, for this timeline, I'll hand it over to Hugo, and I'll add to it as needed. Thank you very much, Fustine. I apologize in advance; I realize it's not perfectly clear, but we can send you the slides separately if necessary.

So, we've created a short roadmap that exclusively concerns the framework applicable to decentralized finance. If we take a slightly broader view regarding crypto-assets, there are indeed other regulations that will come into play. There are also regulations that could have a potential impact on decentralized finance in the coming years, but whose regulatory developments are still underway, and we don't necessarily have any certainty. I'm thinking of the Data Act, which is a... The regulation, which we did not include in this regulatory roadmap for this presentation, focused exclusively on Provision I, which directly addresses decentralized finance within the text.

Therefore, we decided to create a 3-year roadmap, starting this year and extending to 2025. Mika, the first block of legislation aimed at regulating the crypto-asset sector, was published in 2020 in a context where decentralized finance was developing after the Defy Summer. Consequently, European institutions at that time were not necessarily aware of the emergence of this highly innovative ecosystem. However, things have evolved considerably since then. To begin, at the start of 2023, the European Commission launched a study on the integrated supervision of decentralized finance.

The European Commission issued a call for applications from decentralized finance projects to establish a system for monitoring the functioning of decentralized finance using appropriate tools and to determine how to automatically collect data. Data within the ecosystem is needed to implement advanced monitoring systems. Therefore, over the coming months, the Commission will work with stakeholders in the sector, which is not yet public, to establish these monitoring systems adapted to this new sector. In parallel, since July 2021, the anti-money laundering package has been published, containing the text of the AMLR ( Anti-Money Laundering Regulation), which aims to harmonize the fight against money laundering at the European Union level. Recent debates in the European Parliament include provisions that would subject decentralized finance protocols and DAOs (Digital Assets) to obligations regarding the fight against money laundering and terrorist financing.

This is because, at times, if they are controlled directly or indirectly by individuals, they could, in certain situations, be considered digital asset service providers under the MICA Regulation and therefore have to comply with anti-money laundering obligations. The text specifically stipulates that developers and operators of decentralized finance protocols should assess money laundering risks. and terrorist financing when it develops a decentralized finance protocol, so it's quite interesting; it demonstrates the regulator's willingness to manage money laundering risks in the decentralized finance sector. What's perhaps more regrettable is that this is done through tools that aren't necessarily suitable, and there isn't a sufficiently attractive opening to exploit the opportunities offered by blockchain networks to better detect this type of offense. So we would revert to fairly traditional processes that aren't necessarily adapted to decentralized finance.

This is a text on which the association is taking a position, which will soon be the subject of a compromise text at the parliamentary level and will enter a trilogue phase—a phase in which Parliament, the Council of State, and the Commission will exchange views to arrive at a final text. During this phase, we will be proactive in proposing changes to try to ensure that this provision, which aims to regulate DIFA and DAOs, is removed, since that isn't necessarily the purpose of the text and isn't necessarily in line with what It had been decided in Mika, or in the most extreme situation, to try to adapt as best as possible what is provided for by this text, although it is not an article of the text, it is in the introductory paragraphs, but it still has its legal scope in parallel with this LCBFT regulation. You will see that we have included a small reference to Mika, which should come into force in April 2023. So, coming into force means that it will be published in the Official Journal of the European Union. So, Mika does not aim, as I explained previously, to regulate DeFi, but it could potentially have indirect implications on the ecosystem, particularly regarding stablecoins, and especially algorithmic stablecoins, with at times a rather blurry distinction between the classification of crypto-assets that could be issued centrally or decentrally.

Therefore, the evolution of the text and the level 2 texts that will be issued subsequently will allow us to better define this limit, and this will have very important implications at the end of 2023, beginning of 2023. In 2024, international organizations will also take a position on the subject by implementing policy recommendations on decentralized finance. So, for several years now, these international organizations have been taking a position on the subject, but it's really in 2023 that we'll see concrete recommendations on the topic. I'm thinking in particular of AIOSCO with its Fintech Task Force, which is working on decentralized finance. AIOSCO brings together all the regulators worldwide, including the MF (French Financial Markets Authority), which works with this working group on decentralized finance issues.

It is expected that by the end of 2023 or the beginning of 2024, this organization will implement international standards that will not be legally binding but will indicate to states the steps to take to implement regulatory systems for decentralized finance. Similarly, at the end of 2023, the Financial Stability Board ( FSB) should publish policy recommendations on HADIF following a report it published... About a month ago, a report on the subject was published in which he didn't make any particular policy recommendations. He simply explained the risks to decentralized finance, its opportunities, and its rather limited interconnections with the traditional financial system. He also discussed the experiments underway and the new risks, particularly technological ones, raised by this new ecosystem.

What will interest us, especially at the European level, are the legislative developments that will likely occur in the coming months/year. Specifically, in Article 122b of the text, it is stipulated that the European Commission will draft a report, which it will present to the Council of the European Union and the European Parliament, on the development of crypto-asset activities not covered by the text, including decentralized finance, and also the development of landending and borrowing activities, which are addressed separately from decentralized finance in this section of the text. This will likely lead, following this report, to a legislative proposal from the Commission aimed at regulating decentralized finance. This is also a topic on which the association is taking a position. We'll be able to discuss it quite soon, regarding the missions we're implementing on this subject.

So here's a small regulatory roadmap on how Defy will develop over the next two years so you can be aware that regulators are taking hold of this subject quite exponentially and that we need to start paying attention to try to achieve compliance quickly. Thank you, Hugo. And perhaps just to add to this, because it seems like we have a bit of time when we look at this timeline, but in reality, there's already a very short-term question on which Europe needs to take a position, and where the member states and the various stakeholders aren't necessarily aligned: what is decentralized finance and how do we clarify the scope that will be regulated tomorrow by Mika and the day after tomorrow by this ADOC regime that needs to be built, knowing that there are many doubts among these European stakeholders, whether at the parliament level. The advice to the European Commission on the existence of truly decentralized applications means there is still a need to prove that this is a completely new ecosystem that functions differently, and therefore the classic regulatory paradigm cannot be applied. So, in the very short term, we still have this challenge of definition and clarification, which is important because what is not considered Defy will fall under Mik, and in that case, it happens relatively quickly.

Regarding this timeline and all these challenges that need to be met, the association has already undertaken a number of projects in which current members are already very involved, and I take this opportunity to thank them. Actors who would like to join us could continue to guide this work. The first, but I've already spoken to you about this mission in general, is this educational work that is necessary with institutional actors to explain what DII is, to explain who the new actors in Defy are, the new economic governance models, and what the good, the main principles of a regulation would be. So, you've certainly already taken a look at the association's website, at least I hope so, but you can already find the educational articles that have been published on the DIFA website. We publish them on our site, of course, but the goal is also to send them to our contacts so that they form the basis for more informed discussions within the framework of these parliamentary debates.

This educational work is done by us, but also, as I was saying, because we highlight and promote the members of the ZAN, the DIFA stakeholders, who will be able to speak even better than we can about their activities and the new specificities of what they are developing. For this reason, you may have seen on social media the various meetings we were able to organize between Minister Jean-Noël Barreau and various entrepreneurs from the DIAI. Some of them are in the room and they will certainly be able to testify to this, but it was extremely useful for both sides. There were many very challenging questions from the Minister, and so it This also allows stakeholders to better prepare themselves for all the questions that will be asked of them in these debates, particularly European ones. And finally, beyond education and meetings, we must of course make concrete proposals because if we say that the current regulations don't work, if we don't offer anything in response, well, that's what will be applied.

So we must be proactive and offer solutions. For this, we have two levels of action. The French level has been much more visible, especially when France held the Presidency of the Council of the European Union. But France has a strategy that is becoming increasingly clear: to preempt all the work that Europe must carry out, whether on the deffy (a specific type of French nuclear energy), but also on NFTs (New Fibers), and so on. So we know that by working at the French level, it will be very inspiring at the European level.

Therefore, we have this dual approach, with proposals being developed at the French level that will be ahead of the European work, which will then be relayed at the European level. And so, to then inspire work at the European level, the stakeholders we'll have on IT issues in France will include the Financial Markets Authority, but as I was saying, the Ministry of the Economy and Finance, the Secretary of State—excuse me, the Minister Delegate for Digital Transformation and Telecommunications—the Directorate General of the Treasury, and at the European level, the institutions, the European legislators, and the European Securities and Markets Authority. There are also international organizations that we address indirectly, which Hugo mentioned, but which are themselves a source of proposals for these more decision-making institutions. That's why it's important for us to be present with everyone regarding these proposals. There's a report of nine proposals that was prepared by the DAN (Digital Action Network), and so I thank Hugo and the definition committee for this work, and Victor as well, who is here in the room.

Yes, I was saying definition committee, and I'm mentioning all the members who helped lay the groundwork for these more constructive discussions with the authorities. So thank you. And we must continue because this would be my last message, and we must continue with many people around the table to strengthen our positions. Thank you very much. So, as you understand, the next big deadline is this report from the European Commission, which should be published in the coming months.

Currently, the major work the association is doing is at the European level, and on this report, which will soon be presented, we need to make our voices heard. There are nine proposals that are quite clear, but which do n't aim to provide precise qualification systems for what decentralized finance is or what the underlying services are, but rather to provide guidance so that the position of European institutions is as appropriate as possible. This includes the fact that there are several nuances of decentralization, that we shouldn't regulate the technology itself but potentially consider regulating user interfaces, for example, and the need to focus on the new risks that... The emergence of decentralized finance, primarily technological but also focused on the more traditional financial risks that apply to it, and especially on the opportunities that decentralized finance offers to implement new rules while maintaining the same level of rigor to strengthen market integrity and combat... For example, against market abuse or money laundering, without having to implement traditional rules that would sometimes be unsuitable.

Thank you for the introduction, which was a bit longer. Well, first of all, thank you all for agreeing to participate in this roundtable, which this time will focus on the French market and what solutions you believe will be needed to implement a regulatory framework that is as suitable and proportionate as possible, both for the competitiveness of the French sector and so that stakeholders can develop as best as possible without any obstacles. So perhaps before we begin this roundtable, a quick round of introductions so you can all introduce yourselves. I don't know who has the microphone right now, but Pierre, I'll let you introduce yourself. Pleased to meet you.

Hello everyone, thank you for being here. Pierre Peron, I was a member of parliament for Paris, and now I'm retired from politics, so I'm doing something else with my life. Thank you, Pierre. Perhaps Stéphane. This is the crypto MP, for your information.

So, I'm Stéphan Daniel, a lawyer at the Paris Bar, and I'm the founder of DNA Partners, a firm 100% dedicated to tech and blockchain entrepreneurs. Jeremy, thank you, hello everyone, thank you for coming to talk about this very interesting topic. I'm Jeremy Fluxman, a former lawyer, and I now work at Morpholabs as a legal counsel. Morpholabs develops the Morpo protocol for decentralized lending and borrowing, specifically for optimizing interest rates on these decentralized loans. And Romain, I'm Romain Figuero, one of the co-founders of Paladin.

We're a protocol between decentralized finance and governance that specializes in, in fact, voting rights markets, to be precise. Today, thank you very much, Romain. I 'll let you have the floor. I'll let you keep the microphone because we're going to ask you the first question. So, to quickly introduce the topic, what are DAOs, in your opinion?

What is the value proposition of these new forms of governance, and why would it require a paradigm shift, a new regulatory approach? What are the different value propositions compared to more traditional organizations, in your opinion? Yes, well, the reality, I think Faustine highlighted it. Faustine and Hugo, a lot of these terms today don't really have a definition, partly because they don't have a legal definition. When we talk about a DAO, it can be very nebulous.

You'll meet a lot of people, especially this week, who are setting up DAOs. Then, when you dig a little deeper, you realize—I heard someone not long ago say—that you don't have to be decentralized to be a DAO. That's annoying; it's the first word that comes to mind today. When you look at a DAO, if you really see the common points, it's an online community. It's people who have met and are together online.

Then, when we delve a little deeper into the legal aspects, we ask ourselves what type of organization can be Well, a DAO (Digital Asset Organization) can be a company, an association, or a foundation; it depends on what you actually do with the person. So there are many of these organizations that already have relevant CADES (Civil Solidarity Action Plans) and others that don't, because the way we conceived human coordination was in person. Except that, for example, at Paladin, today we're in a different country. Our objective isn't to create a company that will make the most money; it's to create a technological building block that will allow itself to function independently. Therefore, whether it's through its objective, its way of working, or its modus operandi, it doesn't correspond to traditional legal organizations as they exist.

So the appeal we make when we exchange with regulators, and others, is to delve deeper and understand what these projects do. The problem is that today, most people, when they talk and present what they do as DAOs, well, the regulator... Look, he's doing it, well yes, I know what that is, and so the whole challenge today is being able to highlight what these organizations are and what framework we can apply. So of course we're lucky because we have the DANE (Digital Education Authority) which allows us to make proposals, but when we look at what the DAO (Digital Architecture Organization) is, and I'll stop there on this last point, yes, there's decentralization. What does that mean?

It means that there aren't really any central decision-making points, but rather several people who can take decision-making power, and if we remove someone, nothing changes. And the other is autonomous. Autonomous, autonomous, autonomous. This can be interpreted in two ways, and I think it's very important to finish on this. It means either that there's no hierarchical standard above the internal one, or that it runs on its own.

So there's one, which is almost legal autonomy, and the other is technological autonomy. So a smart contract, to a certain degree, is both because It works on its own, but there's no one who can really stop it. You don't necessarily need smart contacts to be a DAO (Digital Organization of Organizations). In theory, you can just be a community of people operating with their own rules. But that implies much more complicated consequences because if you dig deeper and start thinking that way, it means you ca n't apply a regulatory framework on top of it because those rules represent their ultimate legal standards.

So these are challenges we have to take into account today when we think about DAOs. There you go, I hope I haven't made the introduction too long. No, I think it was very clear. So if I have to sum it up in a few words, well, no decentralized, transparent borders, no flat organization, no one with a process or decision- making power superior to another. In theory, in the initial thinking, Pierre, you've worked a lot on the subject.

During your time as a member of parliament, you published a report where you made specific proposals on DAOs. Today, DAOs are a bit of an unidentified legal object. What's your legal perspective on them? To introduce this topic, what research have you conducted on the subject? What conclusions have you drawn?

" Research" is a bit of an overstatement, because when I first became interested in DAOs, it was around 2020. So, the first DAOs weren't from 2020, but they were starting to emerge. They had a lot of capital, especially investment DAOs, so the regulator started to take an interest in them. I agree with what's been said: the problem with DAOs is that, normally, the term should be decentralized, autonomous, and so on. There are many DAOs that aren't decentralized or autonomous, yet they still use the term "DAO" because, in fact, the term " DAO" can encompass many things, including the principle itself.

What a DAO is, is that it's a company whose organization is entirely horizontal, using a technological tool called blockchain, and where governance rights can vary from one DAO to another. Therefore, it's very difficult to define what constitutes a DAO. If we want to define a DAO, it's very often to bring it into a legal framework that allows it to exist, both for those who contract with it and those who use its services. So there's a question of responsibility, a question of territoriality, of knowing which legal rules apply to this DAO. It's clear that— and we'll come back to this because it's the whole point when you 're a lawyer looking into this—there's currently no legal framework in France for DAOs.

If we wanted to get closer to that today, it would be more of a de facto company, and that's precisely the problem because it means... Those who undertake projects through these technological vehicles face a significant legal risk, and therefore it is important to consider that, in the long run, we will need to work on this issue to create a framework that doesn't simply transpose existing structures, but rather, as is often the case in cryptocurrencies, simply transposes what already exists. A DAO (Digital Asset Organization) is essentially a public limited company, a pseudonymous company. The challenge is to find a framework that allows us to utilize the potential of both the technology and this type of organization. In this sense, it is an extremely interesting tool for organizing work, human relations, and ultimately governance within a defined entity in terms of its scope of action.

The fact remains that you can do almost anything in a DAO; that will be my concluding point. You can, how shall I say, reproduce very institutional frameworks within a TAO (Transactional Asset Organization). You can absolutely create an executive committee, a supervisory board, and ultimately grant the final voting rights. From what we can consider, the shareholders who hold the token can certainly have a single vote, or, uh, proportional to the number of tokens held. The holder has the same number of voting rights as the economic right holder.

But we can also consider that we are creating mechanisms where voting rights are not equivalent to token ownership. So, in fact, there is a plurality that will make the issue of qualification extremely complex for legislators tomorrow. And the challenge is to find, at least in France, a way to create a legal category that allows DAOs that want to be based in France to have the means of legal security where they are forced to go to Michigan, Wyoming, BVI, or jurisdictions that are a bit further away from us if they want to be able to operate under conditions where they have a local legal existence. Thank you very much, Pier. We'll talk a little more about what's being done outside of France, but first...

Let's stay focused on France for a moment with Stéphane. As Pierre mentioned, in France, the legislature hasn't yet positioned itself to propose a truly ad hoc framework for DAOs (Digital Assets). So, for legal practitioners, this leaves room for legal engineering. Ultimately, we have several approaches in France. Would you like to talk to us a little about that?

Would you also like to share some of your experiences as a lawyer on the subject? I think that would interest the audience. Yeah, of course. Well, I'm delighted to be here to share some of the work we've done with French entrepreneurs who specifically wanted to structure themselves in France and not abroad, as you were saying, Pierre. So, when we started working—and I mean the firm of AE—when we started working on these subjects practically, not just reasoning theoretically and so on, but really getting down to brass tacks, it was in 2021 for...

So, as I mentioned, they told us, "Okay, we want to set up a DAO in France, how do we go about it, how do we organize ourselves?" So we did a bit of what you might call applied research, meaning we looked at what already existed and decided, "The first thing we'll do is look at what's being done abroad." And that's when we realized that there wasn't really a dominant model, at least not at that time. Ultimately, we arrived at roughly three types of models. There's the model without any legal entity, where you just have communities of token holders who vote and manipulate the assets, which are unchained, but there's no legal entity.

Obviously, it's not always ideal to be in that kind of organization because without a legal entity, you can't... Contracting, and that poses a real problem because we can't raise funds, we can't... we can't just pay a service provider, issue an invoice, pay taxes—things as simple as that are impossible. And to give you an example, there was a developer who came to us wanting to work for a DAO. He was supposed to pay in LP tokens, he had no one to invoice, we didn't know which VAT rate to apply, he didn't have a contract, and he ended up not taking the job.

So that's a typical concrete example of, well, I have a DAO, I don't have a legal entity, I won't necessarily be able to recruit talent as I'd like. So that's the first type of organization. The second type of organization we observed was, let's say, the project founders who put themselves under a commercial company. Today, that's more commonly known as a lab, a software development company. So that's typically the case with Uniswap.

There's the founders' team in a lab, and this lab develops a DAO. At that point, we already have a legal entity that can, if it wishes, raise equity funds. We can potentially pay service providers through the Lab; it's not necessarily ideal, but it's possible. It allows for limited liability for the founders since they are in a commercial company. They can organize their relationships through partner packages, and so on.

So that's the second model we observed. The third model combines the commercial entity—what I just explained, the Lab—with a non-profit entity that will, in a way, encapsulate the DAO's assets. Essentially, the DAO's assets are the code, the intellectual property. This could be the front end, domain names, trademarks, and potentially also contracts related to the DAO's development. So, we end up with two legal entities.

This isn't new; it's existed for a long time. We haven't necessarily seen it from this angle, but in reality, the foundations of blockchains like Layer 1, Ethereum, Cardano, TeSoS, and others are already in place. So, as a non-profit entity, what we observed was that they were either in Zug or the BVI. In fact, some also believe that the best legal form is the Membership Foundation, a type of foundation where there aren't even members, just directors who are chosen. This allows the token holder to remain anonymous.

There are also trusts, and so on. Once we had this overview, we asked ourselves which structure was best. We focused on the last one I just described, which has several advantages, notably because it distinguishes the founders of the project, or at least of the protocol. Both can live their lives, the founders can collaborate on other protocols, and the protocols— the entity representing the protocol—can contract with different types of developers. We then considered how to adapt it to French law, so we looked at several legal entities, obviously.

Commercial companies, well, we set that aside. I'll explain why in a moment. We looked at foundations, endowment funds, cooperative societies, and associations. From all of that, it seemed to us that, once again, it wasn't necessarily the best setup. But in our opinion, at that time, and for those people, it was a very interesting setup: to start with an association.

For economic and legal reasons, the economic reason is that the association doesn't have capital, so it doesn't want to distribute dividends. Therefore, if it generates income, it won't be able to distribute it to what we would call shareholders. So, this is already a form of guarantee that if the DAO—or at least the entity that incorporates or represents a part of this DAO—generates profits, we won't be able to send them to whomever we want, distribute them to shareholders, and so on. And secondly, an association obviously cannot be sold. So, once again, we resolve this somewhat schizophrenic situation, given that...

We want to reach a broad audience, develop open-source, permissionless protocols, and at the same time, the idea isn't necessarily to enrich the founders of this project with equity. So we opted for the association model. We launched these associations, which is quite good because now we have some feedback on the subject, so we see a little better how it works, particularly the tax or accounting issues we might encounter, especially regarding VAT and so on. So that's interesting. But this model remains, in my opinion, perhaps one of the best models for trying to adapt Nao to French law.

And then, with each project, we test and experiment with this model. There are many ways to build relationships, to manage the relationship between the DAO and the association. To simplify, I'll conclude with this: before the DAO even exists, because sometimes the DAO doesn't yet exist when we want to develop it, the association will come and develop it. So, the DAO is essentially a company in formation; it will develop the DAO, and once the DAO exists, the association will act as a kind of agent, a trustee, a guardian—you can imagine it however you like. So that's really the dichotomy: before and after.

And what could be quite interesting—though I haven't seen it yet, but I think we'll see it coming—is having votes from the DAO at its inception, choosing the association and saying, "Here's the association, I ratify everything it did before me, because it did it in my interest, and then I entrust it with this mandate." And then it could be quite interesting because we can imagine many different setups with other associations, commercial companies, regulated companies—it's really a very flexible legal framework that allows for a lot of possibilities. Thank you very much, St. Stéphane, so for this roundtable, we have two project representatives: Morpos and Paladin. These are projects whose CORAM is French, so what is your approach, at least in part, to these regulatory issues?

How are you trying to address them best? What are your views on all this? Perhaps we could start with Jérémy, since you haven't spoken yet. Yes, so we at Morpo, well, on Stéphane's advice, we set up this arrangement with the association, which helps with the legal aspects for the DAO, and a commercial IT development company called Morpholabs, which develops the code for the Morpo protocol. We have a service contract between the association and Morpholabs, whereby the association appoints, or rather mandates, Morpholabs to develop the Morpo protocol and carry out certain IT development operations.

This is the setup we have, which is very good because it allows us to remain in France. It was very important for the founders to be in France because they are French, they studied in France, and it was very important to them to be in France and to develop the ecosystem in France. Part of the work in the crypto field also involves these legal aspects because we're dealing with finance, so there are legal questions that arise. With Stéphane's work, which we continue to do today, we're applying this model and trying to improve it. There are still some issues that aren't easy to resolve, particularly tax and accounting questions.

This touches on many complex issues, and also on liability, because we don't know exactly how a regulator or a judge would assess the association and its responsibilities towards its members, or regarding regulatory status, if there is one to obtain. But in any case, it's a model that works today and, as has been said, allows for great flexibility. That is to say, we can really adapt the association's operation to what we want to do. So we can say whether token holders must be members of the association or not, and create truly customized rules as we wish. And so, the advantage of the association is this flexibility and this sense of capital, and therefore the fact that we don't fall into the category of a company, which poses a problem because if we were to do that, the question arises as to whether the rules on financial securities, the public offering of financial securities, services related to financial securities, exchanges, and so on, apply.

This is something we absolutely don't want because we're dealing with tokens, a different technology, and this legislation is largely unsuitable and outdated. So, it's a setup that's very good because it allows us to remain in France and to and to progress, and uh, we're in discussions with, well, with the DANE (Digital Education Authority), with the regulator, to present it, explain it, and show how to improve it, uh, while having, as a possible ultimate goal, to arrive at a form of recognition of the DAOs (Digital Education Authorizations) with the association or through ad hoc legislation, an ad hoc legal structure, so that it can be recognized under French law. I'll just build on what Stéphane said, and then perhaps build on what Jérémy explained. The reality is that it's actually a bit like a regime. When you choose your legal structure, there's plenty of advice, plenty of people who will suggest the best forms, but it will depend enormously on what you've done.

So, for people who have set up a project here, there isn't one model to follow; it will really depend on what you want to set up, what you want to implement. I really liked what Stéphane said earlier when he He mentioned that some projects, once they deployed the protocol, would ultimately inaugurate a kind of legal representation that could validate everything done previously and thus take over at that point. We would have liked to do that, but it's been quite a while since we launched the project, and now we have to build with what exists today, which is a reality. We also made the choice to have an organization that would represent CAD in France through an association. We sought advice, and we are very grateful for the work that has been done.

In fact, we are currently setting it up. Now, I might disagree with what Jérémy said, in the sense that I am French, and my team isn't necessarily the core team with whom we launched the project. We are very proud to be able to develop the activity in France, and we want to continue doing so, but if the legal framework doesn't allow it, we will go somewhere where we can. The reason is simple: we want to set up our project properly, but if we can no longer set it up in one place, we know there are many other jurisdictions that are doing the work to implement it. It's not up to us to do the work for the jurisdiction.

I 'm a lawyer by training, but I 'm not a lawyer, I'm not a lobbyist. I'm here to set up my project, and that makes a perfect transition to other systems outside of France. This was partly mentioned by Pierre. Jeremy, would you like to tell us a little about other initiatives being carried out elsewhere in Europe and even across the Atlantic? With pleasure.

Well, it's the same question: how do we incorporate this legal framework into our laws? Because we're dealing with an organization that operates on the blockchain, which can have multiple operating rules with identified or unidentified individuals. So, the law always raises the question of how we approach this, and in the legal system, it's a similar question that was raised with... So, digital assets, okay, they're assets or cryptocurrencies, we don't know exactly what they are. We could have simply equated them with financial securities, which is what the AICC is trying to do in the United States, but we see that it's still different, it's a different technology, and it's not necessarily relevant to refer to a ruling from over 60 years ago.

The ruling is... but anyway, the question is how do we receive these new objects in the law? And this question is being asked around the world. There was recently, in particular, a paper from a UK commission on reforming English law—a commission whose goal is to reform English law—that posed the question to the ecosystem and laid out certain concepts, certain foundations. So, they define what DAOs are: an autonomous, decentralized blockchain organization.

They give different types of DAOs: investment, protocol, deFi, social enterprise, and so on. And they raise the central question, which is the legal question, at least. The question is, how do these... these... these...

these... and... and today, in fact, according to the law, at least under English law, it's either a general partnership or an unincorporated association. And the consequence of these two classifications is the unlimited and joint liability of the participants. So, that is to say, someone who participates in a DAO is liable for all the debts of the DAO, for example, tax debts.

So, for example, if... I don't know... €500,000 in tax debt, well, a person can pay it, but it's up to them to seek recourse against the other members of the DAO. So, it's not straightforward. And that's what happened, by the way, with the DAO in the United States, not on a tax issue, but on violations of financial regulations where, ultimately, it was the founders who had to pay a CLC transaction of over $200,000, I believe.

And even the... well, the members, the participants in the DAO were even summoned via a... So, this risk of, uh, in France we say "de facto company," uh, materializing, and this is currently the main obstacle facing DAOs. And in France, that's it, that's also it, it's a de facto company, so it's the rules of a joint venture, so it's limited joint and several liability, and that's quite problematic. So the UK paper raises this and explains this problem, the fact that in this uncertainty, there's this theoretical qualification, but we don't know if, in fact, the DAO, even if it's classified as a General Partnership, can actually hold assets because there's a question of proof.

That is to say, if you open a bank account, well, the bank will ask you for a certificate, a registration, and if you're a general partnership like that, stemming from a legal theory, you don't have proof of legal existence. So, that raises these problems, and so the report continues by saying it observes, in fact, the DAOs that exist Today, who has the use of centralizing structures with the use of commercial companies for the founders of associations, foundations, trusts, etc., to give legal substance and allow the DAO to exist in the legal world? And the report ends by mentioning the legislative initiatives that have already been put in place and adopted because the goal of this report, once again, is for the United Kingdom, at least England, to find a way to incorporate DAOs into English law. So, regarding these legislative initiatives that have already been put in place in some countries, notably the State of Wyoming in the United States, which has a DAO law, and the Marshall Islands as well, I believe there are a few like that.

They have the principle, which is generally the same: they assimilate DAOs to limited liability companies, so joint-stock companies ( SARL or SAS, depending on the case). For example, the Wyoming law requires the registration of the addresses of smart contracts. In any case, it must be identifiable in a special register, so that's still a step forward, which is adapted to the technology. A representative must be appointed in the state of Wyoming, and it must also be explained in the articles of incorporation or in a supplementary agreement how the operating rules of the DAO differ from those of a classic LLC in the state of Wyoming, which isn't easy to do, I think. But in any case, it must be done in light of Wyoming law.

The Marshall Islands are pretty much the same thing, and the main pitfall of these laws is that they treat DAOs as corporations, and that's problematic because it raises the question of what the token is, whether it's a financial security, whether it's subject to classic financial regulations—which is what we want to avoid. And so, that's potentially why these laws haven't been very successful in practice, I think. Then there's the... The report therefore outlines foundations and associations, particularly foundations in Switzerland and the Caisse des Dépôts et Consignations (CDC), which are interesting for the reasons we've mentioned: the flexibility of the organization, the fact that they aren't corporations (there's no capital, therefore no shareholders), and potentially also the tax advantages that can be obtained in the Caisse des Dépôts, for example. And then there's the form without an organization or legal structure, which is a double-edged sword.

It can work very well; we can say that Bitcoin is the first non-incorporated DAO, and it works well for them. There are no legal, tax, regulatory, or other risks at the moment. Etom has a foundation, so a bit like the setup that Stéphan explained we have with the association. However, for those who fall into the regulator's crosshairs, as in the case of OkI, the fact of not having a legal entity entails unlimited liability. And there you have it, I think that covers the issue pretty much.

There's still more to say. Other initiatives, but we could talk about that for quite a while longer, and perhaps it's time to wrap things up with Ben. Regarding the future of the regulation of AOs in France, I'm going to give Pierre a little space. I'll say it again, but you did a report on this where you proposed, in particular, the creation of an appropriate framework for AOs in France. For you, what's needed for a suitable, proportionate framework in France that would allow the creation of a European hub so that AOs can be incorporated in France?

We see in the Sifi markets that the biggest crypto players are setting up in France. How can we try to replicate the same logic for decentralized organizations? In your opinion, the question is first of all why we would need a structure. We need a structure to clarify things so that there is less legal uncertainty for those who undertake them. After that, I'm not entirely in agreement with this logic of saying, well...

We're going to use Indo to escape the current legal framework, well, yes, but that's the easy way out, and very often we see that it's not decentralized, so you get caught, and for good reason, because you're trying to escape a system, and you've actually built a structure just to escape that system. I don't believe in DAOs just to escape the securities classification system. Besides, I think it's hypocritical, both on the part of the Americans in over-classifying what is considered a security and, on the other hand, sometimes in not classifying it as a security. Using a utility won't please the crypto community, but a token that allows you to govern, to take voting rights, therefore political rights, and that pays dividends, for me, that's still more of a security. So we can call it a utility, because, well, there you go.

But actually, the real issue is whether we can create a legal framework where it's easier to undertake Having less risk today by creating tokens that will allow for decision-making within a much more horizontal structure tomorrow, and better value redistribution—that's what we need to work on first. The DAO will follow. That is to say, the DAO, as we've been saying, is still too nebulous today, and depending on how the smart contract is coded, its governance will be coded. Well, we could very well say it looks more like a non-profit, more like a simplified joint-stock company (SAS), more like a company that already exists in practice. So the problem with DAOs in general is that there's no answer.

We could say, "Well, we'll create a legal entity for a DAO," but there are so many disparities that it would be very difficult to implement. So the real challenge for us in France is to protect In fact, the entrepreneur's role is to protect the investor, to ensure they don't have to go into these structures. Because, excuse me, but the Wyoming structures and so on are n't perfect. These structures aren't at all efficient compared to the DAO. If we create a legal entity that forces us to replicate all the actions done in the DAO in a separate legal entity, the DAO doesn't make sense.

It creates an additional layer that generates inefficiency, while we're trying to flatten decision-making. So, in my opinion, we need to work more on what governance is today, what the classification of what could be hybrids between utilities and securities is. And here, I think we shouldn't be hypocritical. The regulator needs to work on mechanisms that allow our entrepreneurs to raise funds with these tools, to integrate them into a legal framework that protects investors and... entrepreneurs, and I think the DAO will come later.

I think the DAO isn't the first thing we should legislate on. I think the legal uncertainty doesn't come from the DAO itself; it comes from the token classification. And that's what weighs most heavily on entrepreneurs today: the need to reclassify their tokens when faced with extraterritorial American law or French law, which isn't very clear on the very classification of the token. Thank you very much, Pierre, very interesting. Uh, perhaps I'll leave one last question for the three of you: Jeremy, Romain, and Stéphane.

You work with or support decentralized finance projects that operate on DAOs. In your opinion, if you had one or two recommendations, what would they be? What are the major pain points that you've identified and that should be addressed as a priority, even though there are several issues, to ensure that the French framework is as attractive as possible and, above all, not to limit it? The potential for innovation among project leaders is something I don't want to monopolize, so I'll be brief. I think there's an urgent need: in corporate law, we have legal mechanisms to incentivize employees and service providers to invest in capital, for example, free shares, BSPCEs (employee stock options), and BSAs (limited liability warrants).

This doesn't exist for tokens, yet we know that often, for crypto and blockchain projects, there's no value other than the token. Moreover, there are many what we call contributors—well, why do they contribute? Because they're rewarded with tokens. And this is a major challenge in the ecosystem that we see in almost every project: how to incentivize team members and contributors with tokens. We quickly run into issues of VAT and corporate tax, things that are, in the truest sense of the word, unbearable.

The project simply can't bear the tax and accounting consequences of these rules. So that's the problem. For me, this is an urgent issue that really needs to change; it's a tax system for Interesting contributors in tokens, thank you very much Stéphane Jérémy. I think it will more or less follow what Stéphane just said. Yeah, well, the subject of free token allocation is a subject, token fundraising is also a subject, uh, in fact, there are a multitude of subjects like that, particularly tax-related ones, that arise today and are quite, well, difficult to resolve.

What's also important is that, well, in any case, for us and for the regulator, for the specialists, and so on, these are complicated questions that would require rewriting the law we've built over 400 years: company law, tax law, accounting law, so regulatory law. So it's not going to happen anytime soon. At least there is progress being made, for example, the example of France and the European Union on the definition of what constitutes a digital asset and the article in the French General Tax Code (CGI) on capital gains and the taxation of capital gains. This is an example of progress and a delimitation that has been made in the law, which allows us to be protected against the classification of security tokens as security assets. As long as we are within the French framework for digital assets, we are protected, which, for example, the United States does not yet have.

What we perhaps need to achieve is to progress in this way, gradually, possibly within the law, but it's complicated because it requires political consensus and political will. And right now, the government has other issues to address. So, for example, regarding Digital Asset Organizations (DAOs), the ideal—though it's rather utopian—is to recognize, in fact, an ad hoc form of social organization, a form of organization, somewhat like what was done for associations with the 1901 law, which is an ad hoc law that defines an association. We should adopt an ad hoc law that defines a DAO. And if possible, from this definition, deduce a tax regime, as was done for the association, which may be subject to commercial taxes or not, depending on whether the association is for- profit or not.

This could be a lead, but again, it's quite complex. And on that last point, what I would say is that the educational work, the work of the DANE (Digital Education Authority), is extremely important because I think it's important to explain the issues and show that solving them isn't easy. And the last point I'll make on this is regarding the tax question in particular: remember that there's a theory called the autonomy of tax law, which states that just because you have a legal classification, you don't automatically deduce a tax classification. This is potentially important in the crypto field because legal classifications aren't yet perfectly established, and you shouldn't deduce consequences from somewhat outdated reasoning. to new situations, uh, and for example, here's the thing: with token-based fundraising, okay, we sell a token, which is a utility token, so in principle it's revenue, VAT, corporate tax, and so on.

But economically, we're raising funds, and so that can justify, fiscally, saying, okay, we'll tax it as a fundraising activity, and that's beneficial for the ecosystem. The company that raises funds will be able to pay employees in France, uh, service providers, on whom VAT will be paid, corporate tax will be paid, and so on. And Romain, I think that will also be a continuation, so yes, but perhaps a little less so in the sense that we are extremely fortunate in France, and it's even more apparent right now because regulators and political institutions are open to dialogue, they are ready to exchange ideas. These exchanges are led by the DANE (Digital Education Authority), and I think we're making giant strides, even if we don't realize it. When we look at what's happening in the United States right now, it's clear that not all jurisdictions are Ready to discuss, some prefer to hit each other.

Uh, I think so, yes, there are tax issues. I'm not convinced that tax issues are the most important, not because they aren't necessary and we need to determine them—on the contrary—but because in France, well, to put it very simply, we pay 30% on [unclear], and to a certain extent, at worst, we've overpaid. That's an exaggeration, it's very crude to say it like that, but in reality, we're more about optimization. We're really trying to determine exactly how much to pay on what. And yes, these are important things, but they aren't things that will prevent us from operating, compared, for example, to the problem of accounting qualifications today, which is completely lacking when you're a DAO (Declaration of Accounting Operations).

What do we put in which box? Most of the time, it doesn't correspond. And secondly, today, in our DAO, there are more than 800 people from dozens and dozens of countries. If we create an entity and say, "Here you go, welcome," it's in France. How many will say yes, how many will say no, and how many won't have the right to say yes because they're in a country where regulations prevent it from being implemented?

So we're trying to establish a framework for something that's already extremely complex to do at the French level, where these are questions that are almost more relevant at the international level. And unfortunately, what's starting to be a little worrying is that there's very little chance we'll achieve international coordination on this in the next few years. So yes, we have a vested interest in doing it right in France because if we can do it well in France, we'll be one of the only places in the world where we can do it. That will be my concluding remark. Thank you very much, gentlemen.

And now, if you have any questions, please feel free to ask them. We had planned to leave 5 minutes for Q&A. Hello Benouch, thank you very much for your opinions on the DAO organization. It was really very interesting. It's not something We discuss this so often, so...

I have two questions. Regarding the organization of the legal entity that supports the DAO, how can the association be a way to protect the DAO members? I'm talking about members other than the founders, specifically regarding limited liability. And my second question, you've been circling around this, but I'll reiterate: when rewards are given through the DAO, can there be VAT on them if it's between, for example, the DAO and a company in France? How do you handle that?

How do you manage it today? Thank you. These questions are very interesting and important. I'll answer the first one first, and then perhaps let you answer the second. Well, it really depends on how the links between the association and the DAO are structured.

If the two entities—because we can call the DAO a single entity—are independent, then the association... It doesn't offer protection to DAO participants, and that's very important to note. Just because you create a legal entity doesn't mean it will protect DAO participants. There's a maximalist approach, something I've never seen and that the entrepreneurs we've always advised never want to adopt: completely encapsulating the DAO within an association. In that case, yes, because a member of an association isn't responsible for the association's actions; the association is responsible.

If the leaders have made mistakes, it's the leaders, but the association member isn't responsible. In that extreme case, where we would have truly encapsulated 100% of the DAO within an association, for example, by saying that a token holder is a member of the association, then yes, we would have genuine protection. But that raises other problems. Here, we're centralizing everything within the association; all the protocol flows are in the association's balance sheet, so there are a whole host of issues. Other problems arise, so we solve one problem, but we create about ten others.

So, there you have it, the answer is... yeah, absolutely, that's why the association still raises questions, and it's a model we need to work on and see if we can find solutions within the law regarding VAT issues. From the moment it's the sale of a product or a service, there's VAT. And the purpose of the association is precisely to have this legal identity that allows us to enter into contracts and therefore to charge VAT when applicable, or to collect VAT. So, for example, in the scenario with the IT development company, the IT development company charges VAT to the association, and so we pay the VAT.

That's also... that's what the association is for. Actually, it's to resolve these kinds of situations where, without the association, we could make crypto payments, but the person making the payment, or all the members of the DAO association, could be held liable for these debts and taxes. So the association offers protection from that perspective, because at least from a VAT standpoint, we can do things properly. So that's really good and it helps limit the tax risk.

We're never completely sure, but it's a good solution. However, regarding the liability of the participants and everything, as Stéphane said, it depends on how the DAO is organized and whether we can consider the DAO a de facto company or not. Where do the responsibilities lie? How are the decisions made technically? So it's not straightforward, and the answer isn't clear today.

I also had a small question. A somewhat controversial question, yeah. Regarding the reports published by GAFFI last year or a year and a half ago on the issue of DeFi, do we still have the capacity to save the front-ends that provide access to the protocol from the application of rules, particularly anti-money laundering regulations, which would require them to complete KYC, especially for end users? Do we still have the capacity to save this as an ecosystem, or are we already anticipating that they will be affected and that we will have to focus on saving the developers, preserving their freedom, and that we will have to sacrifice the front-ends? Controversial question, controversial answer.

I think there are projects—at least, these are things we are studying internally—that will be able to build the legal and technological expertise to be able to legally host the front-ends in the appropriate jurisdictions. That's the first part of the answer. The second part of the answer is that there are many people Anonymous users who, in any case, won't respect the law on this subject, which we certainly do n't encourage, and a third thing is that it's perfectly possible to host your own frontine on your server; it's very easy to do, there are plenty of great tutorials on the internet for doing it, so it's not really possible to stop this, in fact, to a certain extent. What we're going to do is see what government will come along and censor the CEL frontine; you don't have the right to access it. It's a bit like piracy sites; if you look at statistics, piracy hasn't stopped in France.

So it's internet censorship that has never really worked, so I'm curious to see the implementation. Maybe we'll see some new things, but it's more the solutions than the consequences of the ban that would perplex me, that would interest me. Sorry, I don't know if there's an answer, but the topic is messed up. The thing is, if we approach this problem from this angle, we've already lost. The question is whether we should regulate the front-end, given that smart contracts are still accessible, and so on, the fact is that the rules in terms of AML/CFT or what we call Kawcil compliance are simply not adapted to this technology.

So I would prefer that we work on the issue of regulation and compliance of smart contracts, of all decentralized applications, in short, anything that operates on the blockchain, rather than asking whether the host of the front-end is responsible, whether we are required to use an oracle with chain analysis, who controls the wallet that connects to it. I would prefer that the FATF, instead of going after the developer in Venezuela because he developed an application on which... Today he no longer has any responsibility; it's just that he bought the key. I'd prefer the FATF to say, "Well, there you have it. Should n't we actually develop standards with Zquet, or means of remaining anonymous and proving one's identity in protocols that aren't entirely permissioned, but not entirely permissionless, and arrive at a new standard for value exchange where anonymity and pseudonymity are protected, where we aren't controlled by centralized or state entities, and where we have the capacity to supervise when necessary because there are crimes, offenses, and so on, because we still want to maintain public order, at least in our jurisdictions?

We have the means, without infringing on freedoms, to have KYC or compliance models. But it's true that if we're at the point of saying we're forced to create gateways developed by the application, it's because... We've already lost the battle, and I think that's really the thing to explain to the regulators. What was really wrong with what you were talking about—the GAFFI report from 2000, 2021, or 2022—was that the entry point was clearly absolutely wrong. There was no intellectual ingenuity, no understanding of what was happening, and they simply wanted to transpose traditional regulation from a centralized IT actor, saying, "Well, if it doesn't fit into this way of thinking, then it means we have to ban it, plain and simple."

So I think that's it. We have to convince the regulator. I don't think that work has been done. We were talking about Mika, where all the anti-money laundering rules... I think the regulator is very behind on this because the new standards, the new guidelines, don't actually take into account the technological constraints, both technological and...

Also, what technological opportunities do these technologies offer? We have companies in France that make music that have a very strong response, and above all, that allow us to guarantee certain standards in terms of freedom that we defend in our democracies. And today, we're forced to acknowledge that we're tending more towards prohibition and absolute control of transactions in a world that is clearly prohibitive for certain individual freedoms. So, yeah, I think we need to encourage the ecosystem to promote new standards. I don't see enough of them on this subject, but very clearly the standards that are currently being discussed, even if we have compliance tools, aren't the right ones; in any case, they're ineffective.

I have a more political question. We see that there's a rather good dynamic in France, not with pensions, but I have the impression that there's a good dynamic in France regarding dialogue with the regulator and with the government. To what extent is this sensitive? The SCC crackdown we're currently witnessing, where the American regulator is becoming completely anti-crypto, raises the question of whether we're susceptible to pressure from this regulator, which might give the impression they're trying to nip crypto in the bud. Furthermore, how sensitive are we to the potential for change, both in France and at the European level?

My understanding is that the DEF's Mik (Michael Defensive Front) will be discussed once the European Parliament changes. We also regularly see members of parliament inventing amendments without truly understanding what's happening in crypto. So, how sensitive are we to these risks? I'll give my political perspective, and then I'll leave it to the economic players to judge. Personally, I had to wait until I left politics to adopt this counterpoint.

I've always promoted the position of the American regulator, which was rather pragmatic at the time, saying we need to look at... Even so, what he's doing, and then I find myself in a situation where I say, well, what we're doing is pretty good, but in itself, I no longer have political responsibility, so no, no, I already don't understand what the Americans are doing on this subject. Well, I see what happened with FTX, I see that American interests were somewhat challenged, I see that there were problems related to, well, to American investors, and so I think there's a clear desire to put the brakes on after the latest measures, in any case, the decisions of the American regulator are quite incomprehensible because they 're not half-measures. Everything is going to fall under the W test; they're going to prosecute everyone, even players who defend a firm American sovereignty. So we're not used to seeing this type of position from the regulator.

I don't really understand politically what motivates all this. Maybe we'll see in a few months, in a few years. Is it... Internal power dynamics between regulatory institutions: are there truly political or economic logics behind this? I don't know.

But I have to admit that I think we're not as sensitive as we think. We're not so sensitive when the American regulator is pragmatic, while we sometimes tend to shut ourselves off. I don't think we're responding to the regulator's demands today. American risk, even though the big companies in this ecosystem are mostly Anglo-Saxon, so it's still going to hurt the ecosystem as a whole, internationally. However, this gives us the opportunity to capitalize on something we haven't been able to do before because we tell ourselves what we want to hear.

But even though we've had regulatory frameworks from the beginning, we haven't had any major ecosystem players emerge in Europe, and so there's a challenge to create the leaders today who will ensure Europe's sovereignty on Web 3 infrastructure issues. So I think if it's not now, it will never happen because we have an unexpected opportunity that the Americans are offering us right now. Well, I could n't say if French politicians will change their minds tomorrow because the American regulator is changing its mind. The fact remains that the European texts aren't very encouraging; they clearly demonstrate a lack of understanding of how things work. Intellectual laziness and a lack of political vision regarding technological tools and what will enable us to do tomorrow mean that there's still a lot of education to be done.

Hats off to the work of the DANE (Digital Education Authority) and other European organizations, because there's a real need to educate, to de-educate, the political decision-maker. And there always will be parliamentarians who understand nothing, who will defend amendments. Sometimes that's good because they're amendments we push for and therefore align with our position. Sometimes it's amendments that come from other lobbies or sectors that don't want things to change. The fact remains that it's always a power struggle, and I think that to win this power struggle, democratization is key.

We need to convince users of the daily economic benefits of the new products we develop, and that's the first thing to convince them of. That's what will make the French report a success if we don't manage to move from what is technology to a truly concrete, everyday use case. Well, I think we'll lose that battle anyway because there are plenty of others who want to nip this technology in the bud. So it's by winning this democratization that I think we'll also win the political fight and this ability to change the rules. And the fact that today 10% of French people, or a little more, I don't remember, 8 or 10%, own cryptocurrencies, is a very good sign.

It's a very promising sign, which demonstrates that there's an appetite for the issue and that we'll be able to continue convincing people about the usefulness of our ecosystem. Yes, B, I totally agree with Pierre on that. I think that, in fact, in the short term, it's very political and it depends on the government. We see that the United States is very hostile in France. We are fortunate to have a government that works with us and that works to improve things, so that's very positive.

Gary Gensler of the SCC still has two years left in his term. Will he be reappointed? We don't know; it depends on the American presidential elections, and so on. So, in the short term, it's very political. Then, as Pierre says, in the long term, it depends on the adoption of the technology and if a majority of people use it.

Well, we'll find legislative solutions and other things. I'll discuss the French and European texts that have been released and the positions of the regulators. I think it's not perfect, but there is still some work being done. Specialized units are being set up, and it's not easy for the regulators either, because they have to find a compromise between what we would like to have and what needs to be integrated with others, because the players in traditional finance... Today, these new things are coming.

Well, they had to pay for very expensive system approvals to comply with the law, and it's understandable that they want us to have rules too, so we're all playing on a level playing field. So, I think the compromise is generally moving in the right direction. For example, with Mika, I think they've adopted the White Paper model when you make a token offering, so that's good. It's inspired by practice, and therefore the educational work we do with the DANE (Digital Education Authority) to explain what practice is, because practice already does a lot to work towards transparency. Well, these are things that can be adopted tomorrow.

For example, at Morpholabs, with the Morphose protocol we use, do we have a practice of... well, in any case, what I think is good practice is to audit the code, the open code. The source code has been released, and we pay and spend a lot of money to have it audited by companies specializing in technical, or technological, code auditing. This helps prevent situations where code is published and put online, and there's actually a backdoor that allows for the theft of all the funds invested in smart contracts because the auditing firm will detect this a priori. So these are good practices that can be incorporated into law in one way or another.

And so it's up to us to demonstrate that we already have these good practices, that we implement them and explain them to the regulators so they can be adopted. I just want to add something very quickly about the sensitivity of politicians and regulators today, and in any case, that's what we're doing. I think we won't be the only ones today. When you look at most of the big projects, whether in crypto, traditional finance, or decentralized finance, they aren't American projects. If someone talks about American supremacy in crypto, it's a lie.

Today, the biggest exchange is Binance; they're Chinese. It's a bit more complicated, but in any case, they're not American. FX no longer exists. Coinbase isn't that big. HBI is Korean.

So, we're talking about centralized exchanges. Now look at the biggest protocols: Lido; they're not European, they're Russian and European. AV is European. Let's look at Curve; they're Swiss. There's a swap that's American.

In fact, the reality today is that the crypto industry isn't in the United States. Sure, there are incorporations of entities that are in the United States, but when we talk about political sensitivity, if you look at France, Circle just announced it's coming to France. Binance has its European headquarters in France. There are more and more big projects emerging from France. We've talked about many projects based in Europe.

There's an entropy that's being created around France. Um, but more broadly, at the European level, which I think can influence political sensitivities, and more generally because there's a movement today that favors the ecosystem in these regions, and which raises an interesting question of industrial and economic attractiveness. One last little question, and then we'll move on to the cocktail hour. If you have any other questions, feel free to ask them directly when we're at the cocktail hour. Well, that was a great question, Cyril, thank you for bringing it up because it's true that the ecosystem is really dependent on all of this.

I'm going to come back to something a bit more down-to-earth, sorry, and talk about financial flows. We talked about TV earlier, so about the consequences of the contract between two incorporated entities that have a legal personality, but um, the first question is how to account for transfers to associations in the case of French incorporation that you mentioned, and the second question, which is a bit of a follow-up, um, I'd like to have a comparison between the monitoring links for this financial allocation, so the mission budgeting with... The association of the two models, between Morpo and Paladin, and given that we can imagine that donations allocated to missions could be an interesting vehicle, but then how does what happens at the DA level, without a real contract, affect the association? What are the possible models? How did you think about this?

I'll try to answer the first question, which is particularly complicated. What's certain is that, as I said earlier, there are two entities: the association and the DAO. So, two multi-source entities, and therefore segregated assets on one side and the other. On one side, it's necessarily on-chain; on the other, it can be on-chain and off-chain. And to imagine flows from the DAO to the association, assuming it's necessary, it won't necessarily be necessary because, in fact, the association's objective is to develop the DAO, but once the DAO exists, it may no longer need to...

So, the association, there you have it. But assuming there's a necessary flow of funds, I think we would rely on civil law principles. We talked about the company's creation for the DAO (Decentralized Finance Operations). I don't know if that's a qualification a judge would accept, but a mandate is also a matter of civil law. So, a mandate from the DAO to the association is possible, and this mandate, or perhaps this mandate, could be to which we could add a deposit, and this deposit could then be put to work.

So, those are really civil law qualifications: the mandate, the deposit— we can imagine that. And then, regarding the tax regimes attached to the association, having looked into things a little, the non- profit status seems very interesting since there's no VAT, but the criteria to benefit from it are very, very strict, and generally, when you do decentralized finance, it doesn't work. So, there you have it. But we can also imagine DAOs—social, solidarity-based, ESG, green, impact-oriented, or others—and perhaps we can imagine adding tax mechanisms there. Regarding the association itself, to obtain non-profit status, to obtain public interest status, and there we can leverage tax incentives that can be advantageous, assuming the association's purpose aligns with this type of arrangement.

So, at Morpo, we focus on these accounting and tax matters. As I mentioned, the association serves this purpose. We allocate everything we can, distribute it at the association level, and declare everything we've declared. This way, we limit the accounting and tax risk. We work with accountants, Mr.

Capital, who also work with us to understand these things and try to manage them, which isn't easy because there are many crypto transactions that can be carried out; everything is recorded, and so on. So, sometimes untangling all of that is complicated. There are software programs like Crypto and others that help, but we really serve the association by having This accounting and tax identity, and everything else, just to clarify, in your case it's the association that raised the funds. The tokens were sold with a token sale contract concluded between the association and the buyer. And again, the association serves to provide this legal identity because the investor, in fact, if they want to buy, needs a contract.

So, the association is useful for that. And to pick up on what Stéphane was saying, it's this question of the exact relationship between the association and the DA (Directorate of Association). We do n't know. Is it an entity that encompasses everything perfectly? In any case, we don't know.

Is it a mandate? Perhaps? Is it a form of trust where assets are entrusted to a trustee who is responsible for managing them for a beneficiary, who could be the token holders? All these things, we don't necessarily know. In my opinion, it's going to be difficult to resolve them because we're bound to encounter complications in each category.

So, that's why. The idea of ​​a law, that could be interesting to explore, but again, it's not easy. In any case, I think that from a regulatory point of view, if the tax and accounting issues are managed with the association, that's already a huge, huge thing that's settled because it means that we contribute like everyone else and pay taxes like everyone else, and that we do n't try to use the DAO to circumvent the system. Then there's just the uncertainty about the responsibility of the participants, which we don't really know at the association level. Thank you again.

If you have any questions, of course, don't hesitate to ask them during the cocktail hour. I saw that there were other people who had asked... I don't know if you wanted to add a point, but the reality is that there's a lot of uncertainty in the questions that were asked. So that's exactly what I meant: it's hard to give a concrete answer, and the goal isn't to be evasive, it's... We would love it, uh, we would pay.

I think there are many projects here that pay a very, very high price to get the answer, uh, but as long as there's no legal framework, there won't be a definitive answer, and so the only solution is to make do with what we have. So the association model tries to declare and regulate as much as possible, which I think seems optimal in the current state of things. We at Paladin really don't want the association to represent the entire DAO sector because we think it creates problems— I don't have the exact word, but I'm sure—well, we had this discussion with some members of our committee who don't want to be subject to French legislation and regulations because they're not from that country and already have their taxes to pay, for example, in the United States. So, on top of that, they do n't want additional layers. Uh, so we would like to have a qualification for the activity that takes place in France, that pays its taxes, that respects these regulations, and so on.

What ultimately falls outside the scope of French jurisdiction is being addressed by regulations. If something like a transfer window were to exist one day, and therefore the idea for implementing it, I think this is the point we can conclude: anything autonomous, anything that runs independently on a smart contract, at a certain point, might be less about jurisdictional issues. It's what happens after the smart contract that we should be asking ourselves questions about. Thank you all. [Applause]