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?
We are strongly supportive of the proposed templates’ objective to ensure clear delineation between crypto-assets and other forms of traditional financial instruments. However, a targeted improvement should be considered to further promote consistency in determining why a crypto-asset described in its white paper should not be considered to be a crypto-asset excluded from the scope of MiCAR, an e-money token (EMT), or an asset-referenced token (ART), as prescribed under Article 8(4), by including an additional field in the template to provide a detailed explanation on whether a crypto-asset is or is not a hybrid token.
ESMA’s proposed classification criteria and conditions qualifying crypto-assets as financial instruments take a hierarchical approach to classifying hybrid-types tokens, which prioritise the identification of as financial instruments (rather than crypto-asset) if displaying features of a financial instrument. To minimise possible risks of legal uncertainty and liability associated with incorrect qualification, we therefore view that a detailed explanation on whether a crypto-asset is or is not a hybrid token would be critical to facilitating such qualification and ensuring delineation between crypto-assets and crypto-assets excluded from the scope of MiCAR under Art. 2(4).
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?
As above, we view that the template for the purpose of the qualification of ARTs should also include a detailed explanation of why a token is or is not considered as a hybrid token.
In addition, we suggest adding a requirement in the template for the issuer to confirm that the ART does not offer any remuneration to its holders. We note that Article 40 of MiCA Regulation prohibits ARTs from granting interests.
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?
We generally agree that the proposed fields of the template relating to explanations as to regulatory status are sufficiently clear. However, for further clarity, we support the inclusion of a number of additional fields under the proposed template:
- Confirmation that a token does not grant interest to its holders (as Art. 40 prohibits ARTs to offer interest or other forms of remuneration) – see above
- The rights to redemption offered by the token (in accordance with Art. 39)
- Consideration for the voluntary classification of the token as a significant ART and any associated obligations (in accordance with Art. 44 and 45)
4. Do respondents have any comments on the standardised test?
To facilitate a clear interpretation on the above points in ensuring that classification takes into account a crypto-asset or an ART’s possible qualification as a hybrid token and any display of characteristics of remuneration, we believe the standardised test should incorporate two additional questions:
- A question on whether the crypto-asset is a hybrid token. This can be a follow-up question if a negative answer is provided in response to the proposed question of ‘Is it excluded under Article 2(4) MiCAR?’
- A question on remuneration and the granting of interest. This can follow the proposed question of ‘Is a value or right referenced?’.
Finally, we note that the flow chart appears to contain an error regarding the choice between EMT and ART (under the question of ‘Is it referencing the value of one official currency?’), with the choice between two positive responses (Yes/Yes). We view that one of the options should be a negative response (No).