Response to consultation on ITS on the reporting on ARTs and EMTs denominated in a non-EU currency (MiCAR)
Question 1: Do you agree with the proposal included in the ITS on how issuers and CASPs should report on holders in Article 22(1)(a) of MiCAR? If not, please provide your reasoning and suggest an alternative approach
We agree with the approach for CASPs to report unique, pseudonymous identifiers for each holder to issuers, ensuring accurate, non-duplicative reporting. However, sharing personal information (PI) like addresses or personal document details doesn't offer extra benefits over pseudonymous identifiers and risks creating a data trove attractive to malicious actors. While securing PI is crucial, blockchain's nature of broadcasting wallet holdings could inadvertently expose holders' full transaction histories if PI is compromised. Thus, we advocate for the EBA to mandate only the reporting of pseudonymous identifiers by CASPs, enhancing privacy and security while fostering confidence and innovation in blockchain technology.
Question 2: Do you agree with the template S 02.00 - VALUE OF THE TOKEN ISSUED AND THE SIZE OF THE RESERVE OF ASSETS on how issuers should report the different values of the token issued in Article 22(1)(b) of MiCAR, and in particular do you agree with how the maximum value that would trigger the reporting obligation is defined? If not, please provide your reasoning and suggest an alternative approach.
We do not support the proposal on triggering enhanced quarterly reporting when the value of tokens issued exceeds EUR 100,000 on any day. We suggest a more straightforward and workable approach. Instead of relying on daily peaks, a more balanced measure would be to determine enhanced reporting obligations based on the token's average value over the entire quarter. This would mitigate the impact of temporary spikes or anomalies and focus on the consistent performance and presence in the market. By setting a clear, average quarterly value threshold of EUR 100,000 for enhanced reporting would still support the regulatory monitoring of significant activities without imposing undue burdens on issuers that may result from short-term fluctuations.
Question 4: Do you agree with templates S 04.01 - TRANSACTIONS PER DAY - AVERAGE, S 04.02 - TRANSACTIONS PER DAY - AVERAGE_EU and S 05.00 - TRANSACTIONS PER DAY THAT ARE ASSOCIATED TO ITS USES AS A MEANS OF EXCHANGE WITHIN A SINGLE CURRENCY AREA - AVERAGE on how issuers should report transactions under Article 22(1)(c) and (d) of MiCAR? In particular, do you agree to include a separate template (S 04.03 - TRANSACTIONS AND TRANSFERS PER DAY BETWEEN NON-CUSTODIAL WALLETS - AVERAGE) requesting information on transactions and transfers made between non-custodial wallets or other types of distributed ledger addresses where there is no CASP involved? If not, please provide your reasoning and suggest an alternative approach.
We believe the EBA's approach requiring detailed reporting on transactions, including those within and across the Eurozone, places undue burdens on issuers without significantly enhancing regulatory oversight. Specifically, we recommend refining the scope of transactions subject to reporting under Article 22(1)(c) and (d) of MiCAR to those where both the payer and payee are within the Eurozone. This more targeted reporting focus would mitigate the complexity and resource demands on issuers, aligning more closely with the practical realities of transaction monitoring and reporting. Moreover, we advise against the mandate for issuers to report transactions by the holder's country, as it introduces unnecessary complexity and potential privacy concerns. A simplified reporting framework, emphasizing the average number and aggregate value of transactions without necessitating country-specific breakdowns, would suffice for effective oversight. Such an approach would still enable Competent Authorities to assess market impacts and the significance of token usage, without the granular data potentially compromising privacy or imposing excessive reporting obligations on issuers.
Regarding transactions and transfers between non-custodial wallets, we strongly urge the reconsideration of this requirement due to the practical challenges of tracking such activities accurately. Given issuers' limited visibility into these transactions, reporting would have to rely on estimates, reducing the reliability of the data. We suggest that the EBA focus on data that issuers can accurately and reliably report, such as information provided by CASPs, ensuring that regulatory efforts enhance, rather than compromise, market trust and comparability of data for both regulators and investors.
Question 5: Do you agree with template S 07.01 - INFORMATION ON TRANSACTIONS how CASPs should report transactions of Article 22(1)(c) and (d) of MiCAR to the issuers? Do you agree with template S 07.02 - DISTRIBUTED LEDGER ADDRESSES FOR MAKING TRANSFERS ON BEHALF OF CLIENTS to be reported by the CASPs to the issuers? If not, please provide your reasoning and suggest an alternative approach.
The proposal may offer some benefits of enhancing data reconciliation and quality for issuers, but it doesn't reflect or align with the unique nature of non-custodial wallet activity. The provided ledger addresses do help issuers in identifying transactions on the blockchain; however, they don’t fully allow issuers to distinguish transactions involving non-custodial wallets and, as a result, limit any efforts at complete data reconciliation.
We recommend not extending the reporting requirements to include detailed transaction data between non-custodial wallets or ledger addresses without CASP involvement. These types of transactions, by nature, lack clear visibility for issuers, making accurate reporting impractical and raising concerns about the infringement on the utility and privacy of non-custodial wallet users. These wallets should be understood to be something akin to a personal internet browser for blockchain and should offer users autonomy over their assets and afford some legitimate level of privacy.
For these reasons we urge the EBA to reassess the necessity and feasibility of requiring transaction reporting for non-custodial wallets. Any future considerations for such reporting mandates should be predicated on a thorough cost-benefit analysis, ensuring they do not compromise the intrinsic values of security, privacy, and utility of non-custodial technology while ensuring that regulations bolster rather than inhibit innovation and user trust.
Question 6: Do you agree that issuers should define and agree on one common harmonized format and file extension, that they request the CASPs to use for submitting the reports for them? If yes, please provide your suggestions for this common format and file extension.
Yes. While we do not have a specific recommendation we would request that any proposal be offered for comment before being finalized.