Response to consultation on Guidelines on templates for explanations and opinions, and the standardised test for the classification of crypto-assets under MiCAR
1. Do respondents have any comments on the template for the purposes of Article 8(4) Regulation (EU) 2023/1114?
The template provided in Annex A is aimed at ensuring consistency and completeness in the classification of crypto-assets that are neither Asset-Referenced Tokens (ARTs) nor E-money Tokens (EMTs). It is essential to ensure that the template covers a wide range of criteria, including the governing law, distributed ledger technology used, and whether the crypto-asset falls under any exclusions outlined in Article 2(4) (e.g., financial instruments or deposits).
Suggestion: The template could be enhanced by emphasizing the need for cross-referencing to applicable EU-level guidance (e.g., MiFID II) and case law to create consistency across jurisdictions within the EU. MiCAR aims to create a harmonized approach to crypto-assets across the EU. However, crypto-assets may sometimes straddle the lines between different regulatory frameworks (such as securities under MiFID II or e-money under PSD2). Ensuring that the templates for Article 8(4) include references to existing EU directives and case law would prevent diverging interpretations by different national authorities.
In comparison, jurisdictions like the U.S. require token issuers to provide similar detailed disclosures to the SEC under the Howey Test for securities classification. The inclusion of case law and national regulatory measures in the template is important for aligning the classification process with case-by-case evaluations, as seen in the approach of the U.K.’s FCA.
2. Do respondents have any comments on the template for the purposes of Article 17(1) point (b)(ii) and Article 18(2) point (e) of Regulation (EU) 2023/1114?
The template provided in Annex B for legal opinions concerning ARTs places an emphasis on ensuring that legal opinions are well-documented and cover all potential exclusions, such as whether the asset qualifies as a financial instrument or deposit. It allows for a detailed explanation of the token’s attributes and requires references to national legal precedents, which ensures transparency and consistency across the EU.
Suggestion: A clearer indication of how differing national interpretations are harmonized under MiCAR might benefit users. Additionally, considering the evolving nature of crypto regulation, the requirement for continuous updates based on national case law should be emphasized.
MiCAR applies across diverse EU jurisdictions, and national interpretations of crypto-related terms (like “financial instruments” or “e-money”) may vary. Requiring the templates to explicitly state how national legal standards harmonize under MiCAR ensures that issuers and market participants can predict regulatory outcomes and align their operations with MiCAR consistently.
In the United Kingdom, under the FCA's guidelines, market participants receive regular updates on the interpretation of key terms like "security tokens." The FCA explicitly incorporates international standards and evolving case law, ensuring consistency in application. By integrating continuous updates to national case law in MiCAR, the European framework can stay aligned with evolving judicial interpretations.
In Switzerland, FINMA updates its guidelines on Initial Coin Offerings (ICOs) regularly, adjusting for national and international judicial decisions.
3. Do you consider that the fields of the template relating to explanations as to regulatory status are sufficiently clear and would enable a proportionate completion in line with the simplicity or complexity of the structure of the crypto-asset to which the explanation or legal opinion relates?
Yes, the fields within the templates are detailed and sufficiently clear. The rationale behind the templates is to ensure that all significant attributes of a crypto-asset are evaluated in light of existing EU and national laws. By including elements like governing law, case law references, and exclusions, the template enables a comprehensive analysis of the asset’s regulatory status.
Suggestion: However, it might be useful to provide examples or case studies of how these templates are used for both simple and complex cases, similar to the approach adopted by the Hong Kong Monetary Authority for different types of virtual assets.
Crypto-assets range from relatively simple stablecoins to more complex instruments like Decentralized Finance (DeFi) tokens or derivatives. By providing examples of both types of tokens, the templates can offer clearer guidance on what information is expected for different levels of complexity.
The U.S. SEC's approach to token offerings varies depending on whether the asset is a simple utility token or a more complex investment contract under the Howey Test. For simpler assets, the regulatory burden is lighter, while more complex tokens are subject to heavier reporting and compliance.
4. Do respondents have any comments on the standardised test?
The standardised test in Annex C is designed to ensure a harmonized approach to the classification of crypto-assets. It includes a comprehensive flowchart to determine whether an asset qualifies as a crypto-asset, ART, or EMT under MiCAR. This approach is crucial in avoiding regulatory arbitrage across member states.
Suggestion: The test could benefit from adding more examples to address the classification of complex assets, such as decentralized tokens or non-fungible tokens (NFTs), where the lines between categories can sometimes blur.
The crypto landscape is evolving, and some assets, particularly decentralized tokens or NFTs, do not fit neatly into existing regulatory frameworks. Offering practical examples of how the standardized test should apply to these novel assets would enhance clarity for market participants.
FINMA’s ICO guidelines in Switzerland include clear examples for classifying different tokens (payment tokens, utility tokens, and asset tokens) and explain how mixed tokens (tokens that fall into more than one category) should be regulated.
The United States, the CFTC and SEC have provided numerous examples of how decentralized financial instruments (DeFi tokens) should be classified.