Sebastian Sinclair

The French National Assembly has voted to impose stricter licensing requirements on crypto service providers as the country aims to align national policy with proposed EU rules.



The bill, which has already been approved by the French Senate, received 109 votes for and 71 against, according to an <a href="https://twitter.com/AssembleeNat/status/1630617475753684993?s=20" target="_blank" rel="noreferrer noopener">assembly broadcast</a>.



The <a href="https://www.assemblee-nationale.fr/dyn/16/textes/l16b0826_texte-adopte-commission#D_Article_5_bis" target="_blank" rel="noreferrer noopener">legislation</a> will now go to President Emmanuel Macron, who has 15 days to approve it or send it back to the legislature.



If signed into law, the new regulation would do away with the grace period that currently allows over 60 crypto platforms to operate in the country without a full license until 2026.&nbsp;



The new law would require companies to obtain a full license from the Autorité des Marchés Financiers (AMF) beginning in October instead.



Despite the regulation&#8217;s potential impact on the crypto industry, members of the National Assembly have taken a more lenient approach to crypto licensing in the country, giving operators more time to meet new Europe-wide norms.&nbsp;



The initial amendment proposed by centrist politician Daniel Labaronne would have required existing crypto firms to stop operations until they obtained a full license, even before the European Union’s crypto regulations came into effect.



It forms part of a broader effort from French lawmakers efforts in what they deem as a means to protect the financial system after the collapse of FTX.



The EU’s <a href="https://blockworks.co/news/eu-members-reach-agreement-on-mica">Markets in Crypto Assets</a> bill, or <a href="https://blockworks.co/news/eu-members-reach-agreement-on-mica">MiCA</a>, which includes a 12–18-month adaptation period, is set to take effect in full at the start of 2024 at the earliest.&nbsp;



The EU-wide regulatory framework will grant passporting rights for crypto firms operating across the continent.



Originally scheduled for a vote in the EU Parliament last month, the Union&#8217;s landmark bill has been postponed <a href="https://blockworks.co/news/mica-delay-until-april-gives-eu-crypto-firms-ample-breathing-room">until April</a>.



The president of the European Central Bank, Christine Lagarde, has also called for additional legislation to regulate activities related to crypto asset-staking and lending.&nbsp;



This legislation is expected to build on lawmakers’ work for the original bill.



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France Votes on Tougher Measures for Crypto Providers

<div id="highlights-block_6347c03eab5ae" class="highlights">
 <ul>
 <li>The individuals charged with the theft are said to be aged between 19 and 23</li>
 <li>Police investigations began in earnest after witnessing an internet sleuth attempting to track the stolen tokens</li>
 </ul>
 
</div>



French authorities have charged five young individuals for allegedly using a phishing website to scam victims out of millions of dollars worth of their NFTs, including those belonging to the Bored Ape Yacht Club collection.



The five are said to have belonged to a criminal gang that stole the tokens, worth an estimated $2.5 million, between late last year and early this year, <a href="https://www.bfmtv.com/crypto/nft/bored-ape-cinq-personnes-mises-en-examen-a-paris-pour-le-vol-d-une-collection-de-nft_AD-202210120607.html" target="_blank" rel="noreferrer noopener">local media</a> reported. 



The alleged scheme saw the individuals use a website to con victims into handing over their tokens under false pretenses. The site promised to transform their tokens from static images into animated ones.



Among the five indicted, two are suspected of having masterminded the website including marketing. The other three are suspected of having conducted advertising for the site as well as money laundering.



Police said they opened an investigation in late August after being made aware of an <a href="https://zachxbt.mirror.xyz/8k0TmMxxieSiwUfUlqFFKGDVoOx2SnneYti31hoHwUk" target="_blank" rel="noreferrer noopener">analysis</a> conducted by self-styled crypto-sleuth ZachXBT, who’d <a href="https://twitter.com/zachxbt/status/1556791003469647872" target="_blank" rel="noreferrer noopener">posted his findings</a> to Twitter. Two of the individuals are said to have been identified using Zach’s detective work.



Around that time, Zach had identified at least three victims who’d been subjected to the scam. Police have identified five victims, including one individual who’d had three NFTs stolen, with one of the Bored Apes estimated to be worth over a million dollars.



“Over the past year, we’ve seen scammers become more creative with new methods to phish people in Web3,” Zach said at the time.



As a result of its own investigation, the Central Office for the Fight against Crime Related to Information and Communication Technologies — the country’s cybercrimes unit — placed seven people in police custody on Monday.



That included the five individuals charged, aged between 19-24, as well as the parents of one suspect — though the parents have since been released without prosecution at this stage, according to the report.



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French Authorities Charge 5 Over Theft of Bored Ape NFTs

<div id="highlights-block_62a9dc972ed91" class="highlights">
 <ul>
 <li>Policymakers are optimistic about a deal in late June, but some areas of the bill are still being debated</li>
 <li>Environmental impact and anti-money laundering rules have been a source of contention</li>
 </ul>
 
</div>



European Union policymakers held another meeting yesterday in an attempt to reach an agreement on the Markets in Crypto-Assets (MiCA) bill that will shape crypto development in the European common market.



France, which currently holds the EU presidency, aims to close a deal by the end of this month, <a href="https://www.bloomberg.com/news/articles/2022-06-10/eu-aims-to-clinch-deal-on-landmark-crypto-law-this-month?utm_campaign=socialflow-organic&amp;utm_source=twitter&amp;utm_content=crypto&amp;utm_medium=social" target="_blank" rel="noreferrer noopener">Bloomberg</a> reported last Friday. MiCA has been an ongoing discussion since the European Commission first presented a proposal to the European Parliament in 2020.



The rise of crypto markets&#8217; relevance in 2021 accelerated this discussion, and France wants to achieve this milestone while they hold the presidency, which ends this month — the Czech Republic will take over the role in July.



After today’s meeting, another “trilogue” — EU’s last mile with members of the Parliament (MEPs), EU’s presidency and European Commission officials — will happen on June 30. 



The rush is real in Brussels, according to Mairead McGuinness, European commissioner for financial services and financial stability. 



“I really would like to see a political compromise on our MiCA…under the French presidency”, she told MEPs in a hearing this Tuesday, later adding that the legislation is “so urgent, given recent developments.”



The euro’s stability and investor protection were the main priorities for EU policymakers in the aftermath of problems such as the <a href="https://cms.blockworks.co/?s=terra" target="_blank" rel="noreferrer noopener">TerraUSD stablecoin collapse</a>, which, McGuinness said, “has certainly raised a lot of questions and concerns at many levels.” She also mentioned Celsius&#8217; <a href="https://cms.blockworks.co/celsius-withdrawal-halt-reveals-run-risks-on-other-crypto-banks/">pausing all transfers and withdrawals</a> earlier this week. 



MiCA will set common rules for cryptocurrency regulation in all 27 EU member states, putting European regulators at the helm of digital assets supervision across the union with the help of national authorities.



However, some issues in the legislative package have yet to be settled. According to Bloomberg, EU countries and the EU Parliament still disagree on whether to include non-fungible tokens (NFTs) in MiCA, how to regulate big stablecoins, the division of supervisory responsibilities, and the introduction of a ceiling to limit stablecoins usage as a payment method to prevent currency substitution.



Crypto’s environmental impact is yet another issue to be agreed upon. Blockchain for Europe, which represents international industry players at the EU level, claimed today that the Greens and the Socialists, two of the biggest Parliament groups, are trying to introduce amendments that will oblige all cryptoasset service providers (CASPs) to publicly disclose “info on adverse environmental impact of consensus mechanism used to issue each cryptoasset.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Update on <a href="https://twitter.com/hashtag/MiCA?src=hash&amp;ref_src=twsrc%5Etfw">#MiCA</a> ❗️ Hours before the 3rd trilogue, the Greens and Socialists are trying to introduce amendments that resemble the &quot;<a href="https://twitter.com/hashtag/PoW?src=hash&amp;ref_src=twsrc%5Etfw">#PoW</a> ban&quot; that was already voted down by the <a href="https://twitter.com/Europarl_EN?ref_src=twsrc%5Etfw">@Europarl_EN</a> Details in the 🧵below:&mdash; Blockchain for Europe (@BlockchainforEU) <a href="https://twitter.com/BlockchainforEU/status/1536693911112011783?ref_src=twsrc%5Etfw">June 14, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“These proposed amendments do not answer the question of what happens if either a CASP or a token issuer cannot deliver on the ask. Further, it seems likely that a non-compliant actor would be banned at EU level,” the organization said.&nbsp;



Another remaining question is whether anti-money laundering rules will be included in the MiCA package or if this will be addressed in other legislation.



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EU Negotiators Want To Hammer Out Crypto Bill This Month

Macauley Peterson

<div id="highlights-block_626a84c2894eb" class="highlights">
 <ul>
 <li>More EU banks will soon offer digital assets to their clients, Taurus CEO says</li>
 <li>The French DASP license prepares banks to comply with EU-wide regulations</li>
 </ul>
 
</div>



Switzerland has long been thought of as the crypto capital of Europe, with its Zug canton — dubbed ‘Crypto Valley’ — home to <a href="https://www.swissinfo.ch/eng/swiss--crypto-valley--boasts-14--unicorns-/47291870" target="_blank" rel="noreferrer noopener">over a thousand blockchain startups</a>. But other countries in the EU are catching up.



A recent report <a href="https://cms.blockworks.co/report-germany-is-the-most-crypto-friendly-country/" target="_blank" rel="noreferrer noopener">put Germany at the top</a> of the crypto-friendly rankings globally, largely due to the rollout of digital asset custody and trading by German banks. That pattern looks to be going continent-wide, as the French Banque Delubac &amp; Cie, founded in 1924, has become the first to receive the status of Digital Asset Service Provider (“DASP”), allowing investment in digital assets, in partnership with Swiss crypto infrastructure provider Taurus.



The DASP license stems from a 2019 law in France — the PACTE law, or Action Plan for Business Growth and Transformation (“Plan d&#8217;Action pour la Croissance et la Transformation des Entreprises”) — and it should prepare banks well for the next phase of EU regulation, the MiCa, Taurus co-founder Lamine Brahimi told Blockworks.



The MiCA (“Markets in Crypto-assets”) regulation, introduced in 2020 and working its way toward adoption in 2023, is the first EU-wide legislative initiative to establish a comprehensive framework for the issuance of and provision of services for cryptoassets.



Until recently, it was unclear whether or how quickly traditional banks such as Delubac &amp; Cie would move to offer digital assets to their client base, according to Brahimi. Perhaps they would leave the space to unregulated entities — firms without banking licenses. But Brahimi is now confident that more incumbent banks will follow.



<blockquote class="wp-block-quote">“You can assume that the demand now is getting mainstream,” Brahimi said, adding “It&#8217;s not just theory.&#8221;</blockquote>



Roughly half of Europeans prefer decentralized exchanges, according to <a href="https://www.bde.es/f/webbde/Secciones/Publicaciones/InformesBoletinesRevistas/InformesEstabilidadFinancera/22/IEF_2022_1_CapE.pdf" target="_blank" rel="noreferrer noopener">a recent report</a> from the Bank of Spain, which rates France and Germany as the top two crypto friendly countries in Europe. But there’s a wide swath of the European public that welcomes the investor protections which come from dealing with a regulated bank, Brahimi said.



“If you are an expert in managing wallets, and you want to do it on your own and secure your private keys yourself, that&#8217;s fine, but the vast majority of the people out there just don&#8217;t want to manage this complexity, and they want to buy cryptos or tokenized securities, or what have you, in the same way they buy stocks, and have it reported in their consolidated banking reporting.”



These fence-sitters may have an interest in trading digital assets, but they prefer to deal with their existing day-to-day bank rather than establish new accounts with crypto-dedicated firms.



If that proves to be the case, infrastructure partners like Taurus — which works with banks in Germany, Switzerland, France, Spain and Eastern Europe — stand to benefit, as big institutions would rather buy or license a product from a service provider than develop in-house cryptography and specialized IT expertise needed for secure custody.



”Now that the first few banks have made the move, we’ve received multiple calls from players that ask us, ‘how can we move forward?’,” Brahimi said.



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French Bank, Delubac & Cie, First to Offer Regulated Digital Asset Services

<div id="highlights-block_61a624760da75" class="highlights">
 <ul>
 <li>CBDCs are inevitable, but institutions should ensure they can be designed and implemented in a manner that maximizes benefits while minimizing risks</li>
 <li>Crypto assets and DeFi must be regulated to prevent disintermediation and maintain stability of the payment system</li>
 </ul>
 
</div>



Denis Beau, First Deputy Governor of the Bank of France, thinks that innovation in digital currencies can lead to greater efficiency in payments and reduced costs&nbsp; — an unquestionable public good — but only when the health of the existing commercial banking industry is maintained.



In remarks made to attendees at a conference titled, &#8220;The new challenges of financial regulation,&#8221; in Paris on November 19, 2021, but <a href="https://www.bis.org/review/r211128f.htm" target="_blank" rel="noreferrer noopener">released in English on Sunday</a> by the Bank for International Settlements, Beau characterized the risks facing central banks as they attempt to navigate the digitalization of global economies.



His view, which is largely representative of global central bankers, puts digital asset payment and settlement rails based on geopolitically neutral cryptography — i.e. DeFi — on a collision course with the global banking elites.



<h3>Innovations have potential, but&#8230;</h3>



New technologies, notably distributed ledgers, new settlement assets (crypto-assets), Beau said, are likely “to profoundly alter our euro payments ecosystem.”



<blockquote class="wp-block-quote">“These innovations have the significant potential to improve the functioning of our payment system, in particular by making payment means simpler, easier and cheaper to use, and faster if not instantaneous.”</blockquote>



However, the benefits from these innovations can only be realized if policymakers proceed with “caution and confidence.”



<h3>What are the risks?</h3>



Beau called “the dominance of currencies linked by a legally binding rule of convertibility at par” as the first of three “organisational principles of our payment system.” This, combined with the principle that only central bank money can be accepted as legal tender is what allows the dominant central bank currencies to play, what he terms “complementary roles” of money that “fulfills an integrating and anchoring function [and] guarantees the efficiency and stability of our payment system.”



However, Beau says, “these foundations are threatened by the diffusion of innovations across the payments field, which has been sped up by the health crisis and social distancing, if no measures are taken to preserve them.”



The negative normative slant evoked by reference to a “foundational threat” seems rather at odds with the concept of being “technology-neutral”, one goal expressed by, among others, <a href="https://www.bis.org/publ/work951.pdf" target="_blank" rel="noreferrer noopener">BIS economists</a> Raphael Auer and David Tercero-Lucas in July 2021.



However, much of the ideological and political heft behind the momentum of digital assets is indeed explicitly aimed at questioning Beau’s premises. What are the ontological underpinnings of central bank money? How can we ensure the enforcement of their dominance serves the public interest?



<h3>Please don’t hurt the banks</h3>



“The introduction of a CBDC raises complex issues that need to be resolved without penalising banks,” Beau asserts.



In a section titled, “Avoiding disruptive effects for financial intermediaries,” Beau warned that a failure to do just that, “would conflict with our mandate to safeguard monetary and financial stability.”



He outlines the “risk of fragmentation” of the payment system — which is aimed simultaneously at decentralized finance and stablecoins, as well as Big Tech initiatives like the Diem project of <a href="https://cms.blockworks.co/zuckerberg-says-facebooks-new-name-will-be-meta/" target="_blank" rel="noreferrer noopener">Meta Platforms</a> — and also the “risk of concentration,” targeted squarely at the latter.



Beau is also concerned with ways in which CBDCs may interfere with the conduct of monetary policy by central banks.



<blockquote class="wp-block-quote">“The introduction of an unremunerated retail CBDC with no holding limit could make it difficult for central banks to pursue a negative interest rate policy, as market participants would prefer to hold the CBDC instead of assets remunerated at negative rates.”</blockquote>



The positive yields widely available in DeFi would face the same objection, and Beau hinted at the tightening of the regulatory noose around this aspect of the digital asset market, while providing no concrete prescription and acknowledging the practical challenges regulators face.



“I’m referring in particular to the supervision of the development of decentralised finance, where the usual regulatory frameworks are constrained by the fact that issuers and service providers are not easily identifiable in an environment where protocols are automatically executed without intermediaries, and there is no fixed jurisdiction for the services offered.”



The BIS has said that nine out of ten central banks report having, at a minimum, undertaken research and development programs towards a CBDC. Although, to date, Beau noted, only two retail CBDCs have been introduced: the Bahamas&#8217; Sand Dollar and DCash for the Organisation of Eastern Caribbean States. Over twenty pilot projects are underway around the world, he said.



As for the European Union, banks evidently have nothing to fear. Beau concludes that, “given the way in which investigations are being conducted into a digital euro&#8230;it is unlikely that banks will be erased from a future payments landscape in which stablecoins and central bank digital currency dominate.”



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Bank of France Governor: Protect the Banks, We Need Them

<div id="highlights-block_616ff78c4051d" class="highlights">
 <ul>
 <li>A consortium of banks and financial institutions including BNP Paribas, HSBC and Société Générale participated, along with Agence France Trésor, the Debt Management Office of the French government</li>
 <li>Goal of the project was to look at how blockchain could reduce the overall cost and increase the efficiency of the capital markets</li>
 </ul>
 
</div>



The French central bank — Banque de France — embarked on a test of a digital euro in March 2020, to learn how a European CBDC could be used in the exchange and settlement of tokenized financial assets using a permissioned blockchain. A consortium of banks and financial institutions including BNP Paribas, HSBC and Société Générale participated, along with Agence France Trésor, the Debt Management Office of the French government.



According to <a href="https://www.euroclear.com/content/dam/euroclear/news%20&amp;%20insights/Format/Whitepapers-Reports/settlement-french-government%20bonds-in-cbdc-with-blockchain.pdf" target="_blank" rel="noreferrer noopener">a report</a> published by Euroclear, a Belgium-based financial services company that led the project, the experiment “showed the capacity of blockchain platforms to coexist and interoperate with existing settlement infrastructures.”



<blockquote class="wp-block-quote">“By attracting more direct market participants on a common ledger for post trade operations, blockchain could also reduce the overall cost and increase the efficiency of the capital markets,” the report states.</blockquote>



An embrace of blockchain, Euroclear concludes, provides opportunities for the market to “change the way it organised so as to reduce trade to settlement cycles, increase direct market participation and reduce reconciliation efforts.”



These are advantages — in short, speeding transaction settlement and reducing costs — that have been long championed by advocates of DeFi, but they can also serve public and private institutions that rely on more centralized infrastructure.



<h3>A permissioned blockchain</h3>



The French project is not operating on a public blockchain, such as Ethereum, nor do they regard a public blockchain as desirable for the intended use case, where “a framework of control, privacy and confidentiality” were requirements. Instead, with IBM as a technology partner, a <a href="https://cms.blockworks.co/ethereum-steps-up-as-rails-for-new-capital-markets/" target="_blank" rel="noreferrer noopener">permissioned blockchain</a> using Hyperledger Fabric was employed to run the experiment via just three network nodes. (For comparison, Ethereum&#8217;s mainnet has about <a href="https://www.ethernodes.org/history" target="_blank" rel="noreferrer noopener">3,740 nodes currently</a>.)



The parties were aiming to simulate real market activity at scale, with Agence France Trésor issuing securities tokens and Banque de France issuing CBDC tokens using the IBM-built blockchain. The securities’ had an International Securities Identification Number (ISIN) generated by smart contracts, which also managed the auto-collateralization on settlement flows.



In a video <a href="https://www.youtube.com/watch?v=0cSOcoLSBgc&amp;t=36s" target="_blank" rel="noreferrer noopener">posted to YouTube</a> by Eurorclear, Guénolé de Cadoudal, of Crédit Agricole, said, “the tested on-chain business logic demonstrated the benefits of an automatic cash and security liquidity pool by leveraging on-chain portfolios as collateral.”



The participants also found that a token-based approach proved to be just as efficient as an account-based one, with the former better able to facilitate cross-border funds flows.&nbsp;



Euroclear’s Philippe Verriest calls the experiment a success that “demonstrates that a broad range of post-trade operations can be run on blockchain,” adding that, “we believe the blockchain technology could increase the overall efficiency of post-trade operations.”



While blockchain aficionados and industry participants are likely to read this as restating the obvious, it is important to see major public and financial institutions acknowledge the technological merits.



The next step will be to compare these experiments to those running on public infrastructure. Société Générale <a href="https://cms.blockworks.co/major-french-bank-wants-to-back-the-dai-stablecoin-with-40m-in-bonds/" target="_blank" rel="noreferrer noopener">has recently undertaken</a> to embark on one such effort by posting real estate bonds as collateral with MakerDAO.



For now, the reports’ authors conclude:



<blockquote class="wp-block-quote">“It does not seem possible for a public blockchain model to meet all the regulatory requirements to run post-trade activities.”</blockquote>



Perhaps as the technology matures, French institutions can reassess which is more compatible with the principles of liberté, égalité, fraternité.



This story was updated on October 20, 2021, at 10:13 am ET.

French Central Bank Trades Debt Securities on Private Blockchain

<div id="highlights-block_6156f00798d1d" class="highlights">
 <ul>
 <li>MakerDAO, the decentralized organization behind $DAI has been trying to bring real-world assets into collateral mix</li>
 <li>Over 50% of $DAI is currently generated from $USDC collateral, but the Maker Community plans to address centralization risk</li>
 </ul>
 
</div>



MakerDAO, the decentralized autonomous organization behind the $DAI US dollar-pegged stablecoin has received a historic proposal from <meta charset="utf-8"><a href="https://www.sgforge.com/" target="_blank" rel="noreferrer noopener"><meta charset="utf-8">Société Générale-Forge</a> (SG-Forge), an affiliate of French investment banking giant Société Générale (SG). The company wants to onboard tokenized, AAA-rated euro-denominated bonds, into the MakerDAO system.



In DeFi circles, there is a running joke that turns &#8220;the future of finance&#8221; — as though by an auto-correct-mishap — into &#8220;the future of France.&#8221; Now it looks like France&#8217;s future may, after all, include some DeFi dollars.



<blockquote class="wp-block-quote">&#8220;This first experiment at the crossroads between regulated and open source initiatives&#8230;is intended to refinance a Covered Bond Token that has been issued last year on the Ethereum public blockchain,&#8221; <a href="https://forum.makerdao.com/t/security-tokens-refinancing-mip6-application-for-ofh-tokens/10605" target="_blank" rel="noreferrer noopener">wrote</a> Société Générale-Forge in their proposal to MakerDAO.</blockquote>



<meta charset="utf-8">Société Générale is a European banking behemoth, with 138,000 employees in 62 countries. While this initiative is described as experimentation, it is very much in line with the aims of MakerDAO to increase the collateral base of its $DAI stablecoin and diversify away from a reliance on volatile crypto assets (namely ether) and other centralized <a href="https://cms.blockworks.co/the-investors-guide-to-stablecoins/" target="_blank" rel="noreferrer noopener">stablecoins</a> such as $USDC which currently backs about half the $DAI in circulation:



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">DAI&#39;s USDC backing has dropped below 50% again. We plan for this trend to continue. Slowly but surely <a href="https://twitter.com/MakerDAO?ref_src=twsrc%5Etfw">@MakerDAO</a> is making steps to diversify the collateral pool. <a href="https://t.co/GyGK35FNaa">pic.twitter.com/GyGK35FNaa</a>&mdash; Sam MacPherson | hexonaut.eth | 🪱🕳ing (@hexonaut) <a href="https://twitter.com/hexonaut/status/1445374266552225793?ref_src=twsrc%5Etfw">October 5, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The OFH Tokens are tokenized securities (available on Bloomberg as SIN FR0013510518). They carry a nominal value of €40 million, are issued on Ethereum and are backed by home loans issued by a <meta charset="utf-8">Société Générale-affiliated credit institution. The security tokens are based on the <a href="http://www.cast-framework.com/" target="_blank" rel="noreferrer noopener">open-source framework CAST</a> (Compliant Architecture for Security Tokens), which has previously been employed by Banque de France and the European Investment Bank both on the Ethereum and Tezos blockchains.



SG-Forge plans to borrow up to 20 million $DAI for a period of six to nine months, which it will convert to US dollars and loan to its parent SG in exchange for the use of the $OFH tokens as Pledge — effectively a refinancing of the OFH Tokens.



<h3>Dealing with a DAO</h3>



Since the Maker Community is organized as a DAO, the proposal requires that the community vote to appoint as a Maker Representative — <a href="https://www.diisgroup.com/" target="_blank" rel="noreferrer noopener">DIIS Group</a> — that will be empowered to execute the legal contracts for the transaction.



Unlike other assets backing the creation of the $DAI stablecoin, the OFH Tokens have no liquid market, so the liquidation procedure — in the event the loan becomes undercollateralized — is rather more manual than generally applies to MakerDAO&#8217;s other collateral vaults.



However, SG-Forge notes in its proposal notes that this just a first step; European regulations are evolving to support security tokens, and they expect that further growth in OTC desks and other trading venues will allow for more automated liquidation possibilities in the future.



The proposal was met with overwhelming support by the Maker Community forum participants with one calling the proposal, &#8220;a new landmark in DeFi and showing how DeFi and TradFi are merging together to create Finance 2.0.&#8221;



Also of note is that the founder of MakerDAO, Rune Christensen, was evidently unaware of the community efforts behind the scenes to bring this proposal to fruition.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Turns out it was the future of France all along! 😀 Amazed that I had no clue about this at all the whole time. This is one of multiple recent examples in Maker Governance of how the post-foundation model of organization is proving to be more scalable&mdash; Rune Christensen (@RuneKek) <a href="https://twitter.com/RuneKek/status/1443712053273939970?ref_src=twsrc%5Etfw">September 30, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The Maker Foundation is <a href="https://www.coindesk.com/tech/2021/07/20/makerdao-moves-to-full-decentralization-maker-foundation-to-close-in-months">expected to be dissolved</a> by the end of this year, at which point the Maker Community will have full control over the DAO.



The proposal will next undergo an extensive review and discussion phase before it can be implemented, but there is clearly momentum behind the initiative to make this experiment a success.