Response to consultation on Guidelines on templates to assist competent authorities in performing their supervisory duties regarding issuers’ compliance under MiCAR
Question 1: Do you have any comments on template U 05.01 on how issuers should report on their own funds requirements? Do you have any comments on template U 05.02 on how issuers should report on the composition of their available own funds?
• Template U 05.01 focuses on reporting the amount of own funds. It’s critical that the calculation of minimum own funds remains dynamic and reflects operational realities, especially for issuers whose reserve of assets or operational costs fluctuate.
• Template U 05.02 addresses the composition of available own funds, but without clearer definitions of what constitutes "deductions" from own funds, the reporting may be inconsistent.
Recommendations:
1. Clarification on Deductions: Similar to Basel III guidelines on capital adequacy, clearer instructions on how to calculate deductions (e.g., deferred tax assets, intangibles) from own funds should be integrated. This will help maintain consistent reporting across issuers. Clear definitions ensure uniform application across all issuers, enhancing comparability and reliability of reported data. specify which intangible assets (e.g., goodwill, patents) are permissible deductions and under what conditions. The Bank of England's Capital Requirements Regulation (CRR) aligns with Basel III, offering clear guidelines on capital deductions.
2. Harmonization with International Standards: Issuers could benefit from aligning with IFRS 9 standards regarding the impairment and classification of financial instruments when determining the composition of available own funds. This ensures uniformity in financial reporting. Standardized methodologies prevent discrepancies in calculations, facilitating accurate supervisory assessments. The US Generally Accepted Accounting Principles (GAAP) also emphasize standardized financial reporting methodologies.
Question 2: Do you have any comments on template U 06.00 on how issuers should report on their reserve of assets by maturity ladder?
Reporting on the maturity of assets is essential to assess liquidity risk. However, without a robust system for estimating potential mismatches between asset maturity and redemption requests, issuers might fail to reflect liquidity risk accurately.
Recommendations:
• Stress Testing Requirements: Incorporating stress testing scenarios into the maturity ladder provides insights into asset resilience under adverse market conditions. Issuers should conduct liquidity stress tests, similar to those mandated by the Liquidity Coverage Ratio (LCR) under Basel III. This would help identify mismatches and better align the maturity ladder with potential redemption risks.
• Granularity in Reporting: The template could be enhanced by providing a more granular breakdown of the maturity buckets (e.g., 1 month, 3 months, 6 months, 1 year, etc.), similar to EBA’s guidelines on liquidity risk management.
Question 3: To note, templates U 03.01 and U 03.02 in these guidelines are the same templates as templates S 03.01 and S 03.02 in the draft ITS under Article 22(7) of MiCAR, only the tokens in scope of the reporting is different. Do you have any comments on the extension of the scope, compared to the draft ITS, to EMTs referencing to EU currencies for these templates on the composition of the reserve of assets with these guidelines?
The extension of scope to include EMTs referencing EU currencies introduces more complexity in reporting reserve composition. Given the role EMTs play in payments, it is crucial to ensure that liquidity is not compromised due to illiquid asset types.
Recommendations:
1. Asset Liquidity Requirements: Following international standards like IOSCO's principles on liquidity risk management for collective investment schemes, the guidelines could impose a minimum percentage of reserve assets to be held in highly liquid instruments (e.g., cash, government bonds).
2. Cross-Jurisdictional Consistency: For issuers with cross-border operations, the guidelines should harmonize reserve asset classification with foreign regulations (e.g., US SEC Rule 2a-7 for money market funds).
Question 4: Do you have any comments on templates U 07.01, U 07.02 and U 07.03 on how issuers should report information needed to assess the significance criteria as specified in Articles 43 and 56 of MiCAR?
The templates focus on collecting data to assess whether ARTs and EMTs meet significance thresholds under Articles 43 and 56 of MiCAR. However, the criteria for "cross-border transactions" and "market share" could lead to misinterpretation.
Recommendations:
1. Clearer Definition of Market Share: The templates should clearly define how "market share" is calculated (e.g., based on transaction volume, market capitalization). A model based on BIS standards on payment system statistics could provide clarity.
2. Cross-Border Transaction Reporting: To better assess systemic risks, issuers should report on not just the value but also the frequency of cross-border transactions, similar to SWIFT’s cross-border payment reports.
Question 5: To note, templates U 01.00, U 02.00, U 04.01, U 04.02, U 04.03 and U 04.04 in these guidelines are the same templates as templates S 01.00, S 02.00, S 04.01, S 04.02, S 04.03 and S 04.04 in the draft ITS under Article 22(7) of MiCAR, only the tokens in scope of the reporting is different. Do you have any comments on the extension of the scope, compared to the draft ITS, to EMTs referencing to EU currencies for these templates related to number of holders; value of the token issued and size of the related reserve of assets; and information on transactions per day with these guidelines?
Expanding the scope to include EMTs referencing EU currencies introduces complexity, particularly in reporting the number of holders across different jurisdictions.
Recommendations:
1. Geographical Consistency in Reporting: For tokens held across multiple jurisdictions, issuers should adopt a uniform geographical reporting framework, like the one used in FATF’s travel rule for crypto-assets. This ensures that all jurisdictions are equally represented in the data.
2. Holder Identification Best Practices: To mitigate duplication, issuers should implement best practices similar to Know-Your-Customer (KYC) requirements under AMLD5 for better identification of retail vs. non-retail holders.
Question 6: Do you have any comments on template U 09.04 on how CASPs should report to issuers the cross-border transactions that are associated as a means of exchange?
Cross-border transactions reporting is critical for assessing the systemic impact of ARTs and EMTs. However, there is a lack of clarity on how CASPs should define cross-border transactions, especially when multiple jurisdictions are involved in one transaction.
Recommendations:
1. Clear Jurisdictional Boundaries: Guidelines should require CASPs to follow OECD’s BEPS Action 1 recommendations on identifying jurisdictional boundaries in digital transactions. This would provide consistency when reporting cross-border transactions.
2. Real-Time Reporting: Adopting a model similar to the EU’s VAT One-Stop-Shop (OSS) system could enhance real-time cross-border transaction reporting, ensuring accurate tax and jurisdictional oversight.
Question 7: To note, CASPs templates U 08.00, U 09.01, U 09.02, U 09.03 and U 10.00 in these guidelines are the same templates as templates S 06.00, S 07.01, S 07.02, S 07.04 and S 08.00 in the draft ITS under Article 22(7) of MiCAR, only the tokens in scope of the reporting is different. Do you have any comments on the extension of the scope, compared to the draft ITS, to EMTs referencing to EU currencies for these templates related to information on holders; information on transactions; and information on token held by the CASPs with these guidelines?
Extending the scope to EMTs referencing EU currencies for these templates is essential but poses challenges in obtaining accurate holder information, especially when CASPs operate across multiple regulatory regimes.
Recommendations:
1. Unified Data Sharing Standards: Following the Global LEI System for legal entity identification would ensure consistency across CASPs. Issuers should be required to report using LEIs for legal entities and consistent identifiers for natural persons.
2. Standardizing Transactional Data: Aligning the reporting of transactional data with ISO 20022 standards for payment messaging would help streamline cross-border and inter-CASP transactions.
Question 8: Do you have any other comments on the guidelines, the templates or instructions?
While the guidelines are comprehensive, they lack harmonization with existing international regulatory frameworks for financial and crypto-assets, potentially causing inconsistencies in reporting across jurisdictions.
Recommendations:
1. Alignment with International Reporting Standards: The current guidelines provide a structured reporting framework for ARTs and EMTs under MiCAR, but aligning them with established international financial standards would enhance consistency and transparency. The templates and instructions should include provisions that explicitly reference international standards like IFRS 9 for financial reporting and Basel III for liquidity management. This will not only harmonize European standards with global best practices but also provide a framework for future international collaboration on crypto-asset regulation.
2. Real-Time and Automated Reporting : The dynamic nature of ARTs and EMTs, especially those used as a means of exchange, requires real-time data for effective oversight. Current templates suggest periodic reporting (quarterly, annually), but this may not be sufficient for monitoring systemic risks in real time. The EU VAT One-Stop-Shop (OSS) allows real-time reporting of cross-border VAT transactions, providing tax authorities with up-to-date information.
3. Global Harmonization: Aligning the templates with global frameworks such as the FATF recommendations, IOSCO’s standards for financial market infrastructures, and BIS principles would improve cross-jurisdictional applicability.
4. Data Privacy and Security: Issuers and CASPs should adhere to GDPR requirements when reporting personal data, particularly when sharing information across borders. A more detailed approach on handling sensitive data should be included.