Blockchain Gaming and the French Jonum Law in the light of the EU MiCAR Regulation
Normally, on itmedialaw.com, I don't often report on legal developments outside Germany. Particularly in the area of blockchain and cryptocurrencies, considering international aspects can be a significant challenge. However, today I am making an exception.
Something significant has happened in France with the so-called "Jonum Law" that could be of great interest to German blockchain gaming providers. This law is part of the broader legislative package on the regulation of the digital space (SREN), which was passed by the French National Assembly with 561 votes.
The Jonum Law establishes a specific regulatory framework for video games that utilize NFTs (non-fungible tokens) and crypto-based monetization strategies. Consequently, France becomes the first country to introduce dedicated regulation for this evolving sector.
Understanding the Jonum Law
The Jonum Law, also known as the "Jonum regime" (derived from "Jeux à Objet Numérique Monétisable," meaning "games with monetizable digital objects"), aims to foster innovation within the French games industry while protecting users. A key aspect is the formal definition of "Jonum," a term previously lacking clear legal definition.
This definition paves the way for a new regulatory framework specifically tailored to crypto games. It distinguishes them from traditional video games and gambling activities. The law defines a Jonum as any online game allowing players to win redeemable digital assets issued by the game operator.
Therefore, a Jonum is any game that fulfills the following criteria:
- An online game
- Associated with a financial stake
- Based on a random mechanism
- With the expectation of a reward consisting of a monetizable digital asset, excluding any monetary winnings.
A "monetizable digital asset" is further defined as "an element of a game that confers one or more rights associated with the game solely on players and that can be transferred directly or indirectly to third parties in return for payment."
A crucial question arises regarding the compatibility of the Jonum regime with the EU Markets in Crypto-Assets Regulation (MiCAR). MiCAR seeks to establish a harmonized European regulatory framework for crypto-assets. Its goal is to promote innovation and leverage the potential of crypto-assets, all while ensuring financial stability and investor protection.
Although MiCAR does not specifically target blockchain games, it could significantly impact the Jonum regime. This is particularly true concerning the definition and regulation of utility tokens and other crypto-assets employed within games.
Obligations for Jonum Providers
Companies offering Jonum services will face obligations similar to those imposed on providers of games of chance and lotteries. For instance, they must establish their headquarters within the EU or another member state of the European Economic Area. This state must have an agreement with France that includes a clause on administrative assistance for combating tax fraud and evasion.
Furthermore, these companies must appoint representatives based in France. This ensures local accountability and provides a point of contact for regulatory matters.
Since Jonums are prohibited for minors, operators must implement robust age verification mechanisms, akin to those for gambling and sweepstakes. This includes clear warnings about age restrictions and mandating an account opening process with age verification steps. Operators must also ensure that minors do not receive promotional material related to Jonum activities.
Advertising communication by influencers (as defined by the French law of June 9, 2023, on the regulation of commercial influence) is only permissible on online platforms if technical means are in place to exclude minors from the audience.
Operators are also obliged to inform users about the risks associated with excessive gaming. This involves disseminating warnings and implementing transparency measures to prevent compulsive or pathological gambling behavior. They must integrate features like self-exclusion and spending limits, and provide users with summaries of their gaming activity.
Before offering Jonum services, operators must declare their intentions to the French gambling authority, ANJ (Autorité Nationale des Jeux). However, they can commence operations without prior authorization. This declaration is a fundamental step for regulatory oversight, differing from the full licensing process required for traditional gambling and gaming operators. The ANJ is responsible for monitoring compliance with these regulations.
These obligations for Jonum providers appear largely compatible with MiCAR's requirements. This is particularly true regarding consumer protection, the prevention of money laundering and terrorist financing, and supervision by regulatory authorities. Nevertheless, the ultimate impact of MiCAR on specific aspects of the Jonum regime remains to be seen.
Crucially, the classification of digital assets used in Jonum games under MiCAR will be decisive. MiCAR differentiates between crypto-assets considered financial instruments and those not classified as such. The latter fall within MiCAR's scope. The European Securities and Markets Authority (ESMA) will issue guidelines on the criteria for classifying digital assets by December 30, 2024. These guidelines will be highly relevant for the classification of digital assets within Jonum games.
Conclusion and Outlook
The dialogue between the French legislator and the European Commission, though commendable, has caused delays in the adoption of the SREN law. This is detrimental to legal certainty, a principle that initially motivated the legislator to create a swift legal framework for French Jonum companies to develop ambitious projects.
Furthermore, many provisions applicable to Jonum will be referred to the regulator after the Act's promulgation. These include defining reward characteristics, capping criteria for non-monetizable digital assets, listing permitted game categories, and detailing information required for ANJ declarations. Procedures for player accounts and ANJ inspections also fall under this scope.
The evolving legal landscape highlights the need for a stable and transparent regulatory environment to foster trust and innovation in the Web 3.0 market. The Jonum Law and its regime aim to establish a regulated environment for the expanding crypto-based video games sector. This framework not only provides clarity but also introduces safeguards for users and the industry as a whole. While the law's journey is ongoing, and potential hurdles remain in the Constitutional Council, it marks a significant step towards recognizing and regulating the crypto gaming industry in France.
It will be interesting to observe how the Jonum regime ultimately harmonizes with MiCAR. MiCAR intends to create a comprehensive framework for crypto-asset regulation across the EU, whereas the Jonum Act specifically targets blockchain games. The harmonization of these two regulatory sets will be key to establishing a coherent environment for the European crypto gaming industry.
For German blockchain gaming providers, it is always advisable to closely monitor developments in France and at the EU level. Even if the Jonum Law does not directly apply in Germany, it offers insights into potential regulatory directions. Ideally, this will lead to a harmonized legal framework across Europe in the long term, promoting innovation in this exciting future market while safeguarding consumer protection.
MiCAR will play a central role in this European regulation. German providers should familiarize themselves early with MiCAR's requirements and assess how their business models might be affected.