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The transformative wave of artificial intelligence (AI) has made its way to the workplace, bringing tools like ChatGPT into common usage. These generative AI tools—built on large language models—possess the power to carry out a vast array of tasks, from drafting emails to generating code. With their adoption within organizations growing formally and informally, it's become necessary to consider a corporate policy to regulate their use. This guide explores why such a policy is necessary, the key considerations when devising a policy, and how to implement it in your organization effectively. Why a Corporate Policy on Generative AI is Necessary The advent of generative AI tools, such as ChatGPT, has opened up a world of opportunities in the workplace. While this technology offers significant benefits, it also ushers in unique challenges and potential pitfalls that call for a definitive corporate policy to regulate its use. There are several key reasons why such a policy is necessary. Firstly, the accuracy of the information generated by AI tools currently is not infallible. Since these tools operate based on vast data inputs, the possibility of outputting information that could be misleading, biased, incomplete, or factually incorrect—"hallucinations," as they are termed in the AI world— is a real concern. A clear-cut policy can make employees cognizant of this, encouraging them to vet and validate all AI-generated content. Secondly, the data privacy implications of using generative AI tools are not underestimated. Tools like ChatGPT could potentially use shared data for various purposes, such as quality control or debugging, or even integrate it into their datasets, raising potential issues of data privacy and confidentiality. It is crucial, then, for a corporate policy to explicitly guide employees on the acceptable use of these tools in line with data protection laws, confidentiality obligations, and ethical standards. The third reason lies in mitigating legal risks associated with the misuse of AI tools. By delineating the boundaries of permitted use, a corporate policy can reduce the likelihood of legal issues cropping up due to inadvertent misuse or misunderstanding of the AI tool's capabilities. This proactive approach echoes the one taken with the use of other company-provided IT and communication tools, as well as the internet and social media by employees. The fourth factor deals with intellectual property ownership because expressive works generated by AI tools may not be eligible for copyright protection. It posits that copyright law protects human expression, not machine-generated works. Therefore, a corporate policy should offer clear guidance on using AI tools for creating potentially copyrightable works, considering the organization's IP goals. Lastly, implementing a corporate policy can drive efficient and responsible use of AI tools. It can streamline workflows, maximize benefits, and curtail distractions or inefficiencies from misuse or misinterpreting the AI tools' capabilities. Developing and Implementing a Corporate Policy Formulating a corporate policy for using generative AI tools involves careful consideration and strategic planning. Here are some steps to help shape a comprehensive policy: Scope of Use A pivotal starting point in developing a corporate policy for generative AI is defining the scope of use. This pertains to identifying the specific functions for which employees can leverage these tools, such as drafting emails, creating reports, conducting research, or writing software code. By stipulating the permitted uses, the policy can prohibit employees from deploying these tools in high-risk scenarios, such as investment or employment-related decisions that could inadvertently breach laws like the GDPR. Additionally, it's crucial to determine the target audience for the policy and whether specific sub-policies are necessary for different teams based on their unique risk factors and needs. Data Privacy and Confidentiality Guidelines The second component of the policy should focus on data privacy and confidentiality. Guidelines must be established for handling sensitive data, including personal and proprietary information. These guidelines might range from acceptable sharing parameters to strict prohibitions on sharing such information via these AI tools. Simultaneously, the policy should also delineate security procedures aligned with other company-wide security protocols, like the storage of AI-generated content and deletion of sensitive data post-use. Employee Training Once the policy is in place, it's crucial to ensure employees understand and can correctly adhere to it. This necessitates a robust training program that comprehensively covers the policy's guidelines and offers practical advice for responsibly using generative AI tools. Training should also stress the importance of vetting AI-generated content, reinforcing the necessity for critical thinking and validation in tandem with AI use. Compliance Monitoring The fourth step is to establish mechanisms for monitoring compliance with the policy. Regular audits of employee interactions with generative AI tools and the content generated can help ensure adherence to the policy. Additionally, employees should be encouraged—or, in certain cases, required—to disclose when their work product is AI-generated, further fostering transparency and promoting due diligence in content validation and verification. Policy Updates Lastly, as the field of generative AI continues to evolve, so should corporate policy. Regular reviews and updates of the policy should be scheduled to address any new developments, potential risks, and changing legal landscapes. Assigning a dedicated team or individual to oversee this review process ensures that your policy remains up-to-date and relevant in an ever-evolving technological landscape. Conclusion Developing and implementing a comprehensive corporate policy governing such tools is a necessary step toward managing these risks. By delineating the scope of AI use, establishing clear data privacy and confidentiality guidelines, investing in employee training, and ensuring ongoing compliance monitoring and policy updates, organizations can create a solid foundation for responsible AI use. While adherence to these policies relies on the integrity and compliance of the employees it addresses, such a strategy can empower organizations to leverage the full potential of generative AI tools. This, in turn, will facilitate compliance with legal and regulatory requirements and contribute to a more effective, innovative, and legally compliant workplace. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Dubai has made significant strides with its regulatory framework for cryptocurrencies. In 2023, the Emirate introduced new rules and established the Virtual Asset Regulatory Authority (VARA), tasked with overseeing virtual assets' use, exchange, and investment within its jurisdiction. The authority's comprehensive approach covers everything from licensing requirements to company and compliance obligations. Its meticulousness reflects Dubai's ambition to become a global digital asset leader while ensuring protection and transparency for all market participants. What is VARA? - A Snapshot of Dubai's Cryptocurrency Regulator Shaping the contours of the cryptocurrency landscape in Dubai is the Virtual Asset Regulatory Authority (VARA). An instrumental body established recently, VARA stands as a beacon of regulation and oversight in virtual assets and related activities within the Emirate. Functioning with a broad mandate, VARA's authority extends to every aspect of virtual asset service provision. They set the game's rules by defining the licensing requirements for virtual asset service providers (VASPs). However, their role doesn't merely end at rule-setting; VARA possesses the discretionary power to decide on the duration of licenses and even suspend them when necessary. VARA's responsibilities continue beyond shaping regulatory guidelines. They also ensure that all entities in Dubai that wish to engage in virtual asset activities are licensed under their oversight. Any institution or individual planning to venture into any virtual asset activity must first obtain VARA's green light. Types of Cryptocurrency Services Under VARA's Regulation Each service category comprises specific, stringently regulated functions, ensuring a well-ordered operation of the virtual asset ecosystem. Here is a snapshot of these cryptocurrency services: Advisory Services Advisory services revolve around providing personalized recommendations to clients about actions or transactions pertaining to virtual assets. The provision of such advice is conditional upon factors like the client's understanding and experience in virtual asset investments, financial standing, and investment objectives. Broker-Dealer Services Broker-dealer services encompass various activities, including facilitating the arrangement of orders, soliciting or accepting orders for virtual assets, matching transactions between buyers and sellers, and conducting transactions as a dealer on behalf of the entity. These services also extend to making a market in virtual assets using client assets and offering placement, distribution, or other issuance-related services to clients launching virtual assets. Entities engaged in these activities must comply with the VA Issuance Rulebook. Custody Services Custody services involve the safekeeping virtual assets for other entities and act upon their verified instructions. Only VASPs that maintain each client's assets in separate virtual asset wallets can qualify for a Custody Services Licence, further underpinning the need for a robust and secure custodial infrastructure. Exchange Services Exchange services entail conducting exchanges, trades, or conversions between virtual assets and fiat currency or between various virtual assets. This category also includes maintaining an order book to facilitate these transactions. Lending and Borrowing Services Under this category, virtual assets are transferred or lent from one or more parties (lenders) to one or more other parties (borrowers), understanding that these assets will be returned either during or at the end of the agreed-upon period. Payments and Remittances Services These services involve receiving virtual assets for transmission or transfer from one entity to another or from one entity to a different virtual asset wallet, address, or location. VA Management and Investment Services VA Management and Investment Services incorporate acting on behalf of an entity as an agent or fiduciary, or taking responsibility for managing, administering, or disposing of that entity's virtual assets. Services may include investment management or staking virtual assets to earn fees or other amounts paid to validators or node operators of a proof-of-stake Distributed Ledger Technology. Cost of Providing Cryptocurrency Services in Dubai The Virtual Asset Regulatory Authority (VARA) mandates a set of license applications and annual supervision fees for each virtual asset service category. Here is a breakdown of the costs associated with providing these services: Advisory Services Licence Application Fee: AED 40,000 Annual Supervision Fee: AED 80,000 Broker-Dealer Services Licence Application Fee: AED 100,000 Annual Supervision Fee: AED 200,000 Custody Services Licence Application Fee: AED 100,000 Annual Supervision Fee: AED 200,000 Exchange Services Licence Application Fee: AED 100,000 Annual Supervision Fee: AED 200,000 Lending and Borrowing Services Licence Application Fee: AED 100,000 Annual Supervision Fee: AED 200,000 Payments and Remittances Services Licence Application Fee: AED 40,000 Annual Supervision Fee: AED 80,000 VA Management and Investment Services Licence Application Fee: AED 100,000 Annual Supervision Fee: AED 200,000 The Licence Application Fee is applicable for all license applications, regardless of the type of regulated VA activity. The License Extension Fee applies for each additional VA activity. Importantly, these fees are due at the time of submission of the Licence application, and the application will only be processed once the payments are received. VASPs must pay an Annual Supervision Fee for each licensed VA activity before conducting any actions. VARA reserves the right, at its sole discretion, to impose additional fees or modify supervision and authorization fees. This discretion may be exercised when VARA deems it necessary to allocate additional resources for regulatory oversight, supervision or in response to complaints made to VARA about a VASP. Fees imposed by VARA are separate and independent from any fees charged by other competent authorities, whether in the UAE or outside. Furthermore, VARA can impose a fee for applications by prospective issuers seeking approval to issue a Virtual Asset. Licensing Requirements Once a license is granted, the Virtual Asset Service Providers (VASPs) must comply with all licensing conditions outlined by VARA. These conditions include, but are not limited to, strict adherence to all Regulations, Rules, and Directives, both at the time of licensing and throughout operation. In cases where a VASP conducts any licensed VA activity outside the Emirate, compliance with the existing Regulations, Rules, and Directives is considered the minimum standard. In other words, VARA's regulations must be adhered to irrespective of the regulatory regime of the other jurisdiction. A professional exemption applies to professionals such as registered practicing lawyers, accountants, and professionally licensed business consultants. These individuals do not need a license to carry out any incidental VA activities in their professional practice. However, they must maintain authorization from a competent professional body and hold appropriate professional indemnity insurance. VARA reserves the right to determine whether an entity has invoked this professional exemption appropriately. There's also a category of entities known as "Exempt Entities" that, subject to certain conditions, aren't required to comply with certain regulatory provisions. These conditions include seeking confirmation of exempt entity status and obtaining no-objection confirmation from VARA before carrying out any VA activities. Entities involved in large-scale proprietary trading, those investing their own portfolio in Virtual Assets exceeding the equivalent value of USD 250,000,000 within a rolling thirty calendar day, must register with VARA. This registration, however, does not imply a license to carry out any VA activities. Voluntary registration is open for entities providing technology services related to Distributed Ledger Technology to other businesses or entities actively investing their own portfolio in Virtual Assets. VARA's Powers VARA possesses discretion in granting licenses. In doing so, it considers all information provided during the licensing process and any other relevant information. The licensed VA activities will be clearly specified in each license, and VARA may also incorporate any limitations or stipulations it sees fit. The authority retains the power to vary, suspend, or revoke licenses. VARA may also impose additional requirements during the licensing process. Finally, VARA charges fees for processing the application for a license or any other authorization and for the supervision of any entity that has been granted a license. The Rulebooks Governing VA Activities VARA's regulatory system for Virtual Asset (VA) activities extends to specific Rulebooks. These Rulebooks serve as a guide and regulatory framework, outlining the expectations and requirements for Virtual Asset Service Providers (VASPs) in their operations. They are integral to VARA's regulatory landscape. General Rulebooks All VASPs must comply with four primary Rulebooks that govern various activities. These Rulebooks, which may be revised over time, are: Company Rulebook: This sets forth the regulations concerning the company's governance, management, and operational aspects. It may include stipulations on organizational structure, roles and responsibilities, and general business practices. Compliance and Risk Management Rulebook: This Rulebook is central to understanding and managing risk. It details procedures for risk identification, assessment, and mitigation. Additionally, it outlines the compliance requirements to ensure adherence to all applicable laws, regulations, and directives. Technology and Information Rulebook: As VASPs operate in a technologically driven space, this Rulebook provides guidelines on technological infrastructure, data security, information management, and related processes. Market Conduct Rulebook: This Rulebook is designed to ensure fair and transparent market practices. It includes regulations on professional conduct, market integrity, customer relations, and transparency in operations. VA Activity-Specific Rulebooks Beyond the four general Rulebooks, there are several VA Activity-specific Rulebooks that VASPs must adhere to. The applicability of these Rulebooks depends on the specific VA activities the VASP is licensed to perform. They include: Advisory Services Rulebook: This Rulebook guides the professional and operational standards required when offering advisory services in the VA space. Broker-Dealer Services Rulebook: For VASPs involved in buying, selling, and dealing in VAs, this Rulebook outlines the specific requirements, responsibilities, and standards to be upheld. Custody Services Rulebook: VASPs providing custody services for VAs must follow the directives in this Rulebook, which may encompass requirements around the security, handling, and storage of VAs. Exchange Services Rulebook: This Rulebook governs the standards and operations for VASPs offering exchange services, detailing the guidelines for exchange processes, security measures, and transaction procedures. Lending and Borrowing Services Rulebook: For those offering VA lending and borrowing services, this Rulebook outlines the specific protocols, risk considerations, and customer relations requirements. Payments and Remittances Services Rulebook: VASPs facilitating VA payments and remittances must comply with this Rulebook, which stipulates procedures for these services, including security, speed, and customer protection measures. VA Management and Investment Services Rulebook: For VASPs involved in managing and investing in VAs, this Rulebook governs the regulations for investment strategies, portfolio management, and investor relations. In conclusion, the series of Rulebooks outlined by VARA signifies the commitment to ensure a thorough, organized, and regulated environment for VA activities. They create a comprehensive structure for VASPs, fostering a level playing field, ethical practices, and the highest degree of professionalism in the industry. Please visit the official VARA website for additional details regarding these Rulebooks' specific requirements and directives. It provides comprehensive and current information to ensure absolute compliance with all VA Activities regulations. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Welcome back to our ongoing series on crypto-assets. In our previous discussion, we explored the legal aspects of e-money tokens under the Markets in Crypto-Assets (MiCA) regulation. Our focus was on the foundational aspects like issuance, redeemability, marketing, and fund investment related to e-money tokens. We recommend perusing that article for a broad understanding of e-money tokens if you missed it. Today, we advance further into this topic, focusing on a specific class of tokens known as 'Significant E-Money Tokens.' These tokens have additional implications and responsibilities, which make their understanding essential for anyone involved in the crypto space. Classification of E-Money Tokens as Significant E-Money Tokens What makes an e-money token "significant"? It all comes down to the criteria stipulated in the MiCA regulations. Under these provisions, the European Banking Authority (EBA) can label e-money tokens as "significant" if they meet at least three of the outlined criteria mentioned below. The classification process occurs under two main instances: During the initial report following the offering or seeking admission of tokens to the public. If the tokens meet the criteria in two consecutive report periods. For cases where multiple issuers release the same e-money token, data from all issuers is considered for the assessment. The competent authorities from the issuer's home Member State must report all relevant information for the assessment to the EBA and the European Central Bank (ECB) twice a year. Interestingly, if the issuer is based in a Member State that doesn't use the Euro as its official currency, or if the e-money token is referenced to a non-euro Member State's official currency, the data must also be transmitted to that Member State's central bank. After evaluating the token against the criteria and confirming that it meets the conditions, the EBA prepares a draft decision to classify the e-money token as significant. The issuer, the competent authority of the issuer's home Member State, the ECB, and, when applicable, the central bank of the concerned Member State are all notified of this draft decision. These parties are then given 20 working days to submit their written observations and comments. The EBA will duly consider these inputs before making a final decision. If the EBA concludes to classify an e-money token as significant, it will notify the issuer and its competent authority. Consequently, the supervisory responsibilities related to the issuer are transferred from the competent authority of the issuer's home Member State to the EBA. This transition happens within 20 working days from the date of notification. However, there's an exception to this rule. For significant e-money tokens denominated in a non-euro official currency, supervisory responsibilities won't transfer to the EBA if at least 80% of the token holders and transaction volume are concentrated in the home Member State. The EBA must also conduct an annual reassessment of the classification of significant e-money tokens. If it determines that a token no longer meets the criteria, it prepares a draft decision to declassify the e-money token from being significant and notifies all concerned parties. Like the classification process, these parties are given 20 working days to submit their observations and comments in writing before the EBA makes a final decision. Suppose the EBA decides that an e-money token is no longer significant. In that case, supervisory responsibilities related to the issuer are transferred back from the EBA to the competent authority of the issuer's home Member State. This transition happens within 20 working days from the date of notification. Specific Criteria The criteria to be met for e-money tokens to be classified as "significant," as indicated in Article 43 of MiCA, are: Number of Holders: There must be more than 10 million holders of the e-money token. Value and Market Capitalization: The value of the e-money token issued, its market capitalization, or the size of the asset reserve of the issuer must exceed 5 billion Euros. Transaction Volume: The average number and aggregate value of transactions per day during the relevant period must be higher than 2.5 million transactions and 500 million Euros, respectively. Gatekeeper Issuer: If the issuer of the e-money token also provides core platform services designated as gatekeeper according to the Regulation (EU) 2022/1925, the token could be classified as significant. International Activities: The issuer's activities on an international scale, particularly the use of the e-money token for payments and remittances, can make the token significant. Interconnectedness: The e-money token or its issuers must have significant interconnectedness with the financial system, showing the token's influence within the broader financial network. Multiple Issuances and Services: If the same issuer issues at least one additional asset-referenced token or e-money token, and provides at least one crypto-asset service, the token could be deemed significant. Voluntary Classification of E-Money Tokens as Significant Opting for Classification: An issuer of an e-money token, who is authorized as a credit institution or an electronic money institution (or is applying for such authorization), can voluntarily opt for their e-money token to be classified as a 'significant' e-money token. In such an instance, the competent authority must notify the European Banking Authority (EBA), the European Central Bank (ECB), and, in certain cases, the central bank of the Member State concerned. For the token to be classified as 'significant' in this manner, the issuer needs to illustrate, via a detailed program of operations, that it is probable to meet at least three of the criteria set out in Article 43(1) of the MiCA Regulation (set out above). Draft Decision by EBA: Post notification, within 20 working days, the EBA is to prepare a draft decision based on the issuer's program of operations, highlighting whether the e-money token fulfills or is likely to fulfill at least three of the criteria mentioned in Article 43(1). This draft decision is then to be shared with the competent authority of the issuer's home Member State, the ECB, and, in certain cases, the central bank of the concerned Member State. After notification of the draft decision, there's a window of 20 working days for the competent authorities, the ECB, and potentially, the central bank of the Member State concerned to provide written observations and comments. The EBA then carefully considers these comments before finalizing the decision. Final Decision: The EBA's final decision on the classification of an e-money token as 'significant' is to be made within 60 working days of the initial notification. The decision is then to be communicated to the issuer of the e-money token and the competent authority without delay. Transfer of Supervisory Responsibilities: Should an e-money token be classified as 'significant' per a decision by the EBA, supervisory responsibilities concerning the issuers of these tokens will transition from the competent authority to the EBA within 20 working days of the decision's notification. The EBA and the competent authorities will work together to ensure a smooth transition of supervisory competencies. Derogation: An exception exists where supervisory responsibilities for issuers of significant e-money tokens denominated in an official currency of a Member State other than the Euro will not be transferred to the EBA. This applies if at least 80% of the holders and transaction volume of these significant e-money tokens are, or are expected to be, concentrated in the home Member State. The competent authority of the issuer's home Member State will then provide annual information to the EBA on applying this derogation. In this context, a transaction is considered to occur in the home Member State if either the payer or the payee are established in that Member State. Additional Requirements for Issuers of E-money Tokens Electronic money institutions that issue significant e-money tokens must comply with: Articles 36, 37, 38, and Article 45(1) to (4) of MiCA, which replace the requirements of Article 7 of Directive 2009/110/EC. These articles outline obligations around reserves of assets, custody, and investment of these assets, and the adoption and implementation of a risk management policy. Article 35(2), (3), (5), and Article 45(5) of MiCA, which take the place of Article 5 of Directive 2009/110/EC. These provisions involve the calculation of own funds requirements, stress testing, and a stipulation that own funds amount to 3% of the average amount of reserve assets for issuers of significant asset-referenced tokens. However, there's a deviation from Article 36(9): issuers of significant e-money tokens must mandate an independent audit every six months from the date the e-money tokens are classified as significant, as per either Article 56 or 57. Regulation for Non-Significant Tokens: Competent authorities of the home Member States have the authority to require e-money institutions that issue e-money tokens (not deemed 'significant') to comply with any requirement specified in paragraph 1. This measure is in place to mitigate risks, such as liquidity and operational risks, and risks stemming from non-compliance with the reserve management requirements. * * * To wrap things up, the digital landscape is continually evolving, and so are the regulatory frameworks to keep it in check. The Markets in Crypto-Assets (MiCA) regulation offers detailed guidelines on how digital assets, including e-money tokens, should be handled, issued, and regulated in the European Union. Notably, under MiCA, issuers of significant e-money tokens are subject to specific requirements around reserves of assets, own funds, and risk management, focusing on enhanced reporting and auditing. The regulations also provide the competent authorities the discretion to apply these requirements to non-significant tokens to mitigate various financial and operational risks. We ensure that our clients are well informed and can navigate the evolving landscape of digital assets confidently. As the world moves towards a digital future, we're here to help you understand and comply with the necessary regulations. Stay informed, stay compliant, and embrace the future with us! DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Welcome back to our deep dive series exploring the diverse landscape of the Markets in Crypto-Assets Regulation (MiCA). Previously, we delved into the complexities of Asset-Referenced Tokens (ARTs), their classifications, and the unique responsibilities issuers bear under MiCA. If you haven't had the chance to read those articles yet, we recommend starting with them to fully understand the context (Part 1, Part 2, Part 3, and Part 4). Today, we focus on another exciting facet of MiCA – E-money Tokens (EMTs). These instruments are transforming the digital financial landscape by leveraging the potential of blockchain technology while maintaining regulatory compliance. This article aims to demystify the regulations around EMTs and provide a comprehensive understanding of what it entails to issue and manage these digital tokens under MiCA. Whether you're an issuer looking to delve into this dynamic world or a curious observer eager to grasp the nuances of digital finance regulations, you're in the right place. Let's dive in. Requirements for the Offer to the Public or Admission to Trading of E-money Tokens (Article 48) The entity making the offer or seeking to trade an EMT in the EU must be the issuer of this EMT. In addition, the issuer: Must be authorized as a credit institution or an electronic money institution. Has to prepare a crypto-asset white paper, notify the competent authority of it, and make it public (below in detail). If the issuer provides written consent, other entities can also offer or seek to trade its EMT. These entities must comply with Articles 50 (Prohibition of granting interest) and 53 (Marketing communications) of MiCA. For regulatory purposes, EMTs are treated as electronic money. If an EMT references an official currency of an EU Member State, it is considered as being offered to the public in the Union. If an issuer intends to offer EMTs to the public or seek their admission to trading, they must notify their competent authority of their intentions 40 working days before the planned date. Even if exempted under the particular circumstances (below in detail), issuers must prepare a crypto-asset white paper and notify the competent authority. Deep Dive: E-Money Directive Exemptions Let's look at the exemption stipulated under Article 9(1) of Directive 2009/110/EC and how it interacts with MiCA's requirements to EMTs. Article 9(1) of the E-Money Directive gives Member States the discretion to relax certain requirements for institutions dealing with electronic money under specific circumstances: The total business activities of the institution must generate an average outstanding electronic money amount that doesn't exceed a limit set by the Member State, but in no case should it surpass EUR 5,000,000. None of the natural persons responsible for managing or operating the business have been convicted of offenses related to money laundering, terrorist financing, or other financial crimes. What does this mean in the context of MiCA? MiCA Article 48(1) sets forth the requirements (mentioned above here) for any person or entity intending to offer E-money tokens (EMTs) to the public or seeking admission to trading in the EU. However, issuers of EMTs who fall under the exemption as per Article 9(1) of the E-Money Directive are not required to comply with those MiCA's requirements in Article 48. In simple terms, if an issuer qualifies for the exemption under the E-Money Directive, such issuers do not need to be authorized as a credit institution or electronic money institution, nor are they required to notify and publish a crypto-asset white paper to offer or trade EMTs. Application of The Electronic Money Directive to EMTs: A Closer Look MiCA's regulations concerning EMTs do not apply to EMTs exempt under Articles 1(4) and (5) of the Electronic Money Directive. Let's examine these exemptions: Article 1(4) of the Electronic Money Directive states that the Directive does not apply to the monetary value stored on exempted instruments that can be used to acquire goods or services either within a limited network of service providers or for a limited range of goods or services. This typically includes store gift cards or loyalty points redeemable only within the issuer's network. Article 1(5) of the Electronic Money Directive specifies that it does not apply to the monetary value used for payment transactions made through telecommunication, digital, or IT devices, where the purchased goods or services are delivered to and used through the same type of device. However, this exemption is valid only when the telecommunication, digital, or IT operator does not act only as an intermediary between the payment service user and the goods or services supplier. So, if EMTs fall under these exemptions, they're not bound by most of MiCA's regulations regarding ETMs. However, there are two exceptions to this: Paragraph 7 of Article 48 and Article 51, which discuss the content and form of the crypto-asset white paper for e-money tokens, still apply to these EMTs. Issuance and Redeemability of E-money Tokens Article 49 of MiCA centers around the issuance and redeemability of e-money tokens (EMTs). It presents certain regulations that deviate from the stipulations in Article 11 of the Electronic Money Directive (Directive 2009/110/EC) exclusively for the issuance and redeemability of EMTs: Claim Rights: EMT holders are granted a claim right against the issuers of those EMTs. Issuance At Par Value: Issuers of EMTs must issue these tokens at par value upon receiving funds. Par value, in this context, means that the face value of the EMT must equal the amount paid to acquire it. Redeemability At Par Value: The issuer must redeem EMTs at any time and at par value upon the holder's request. Redemption refers to exchanging your EMTs for traditional funds, other than electronic money. Redemption Conditions: The conditions for redemption must be prominently mentioned in the crypto-asset white paper. This makes the redemption process transparent to EMT holders, ensuring they are fully informed about the terms of redeeming their EMTs. No Redemption Fee: Lastly, redeeming EMTs must not be subject to any fee. No Interest on E-money Tokens Looking closely at Article 50 of the Markets in Crypto-Assets (MiCA) regulation, we can better understand the rules relating to granting interest on e-money tokens (EMTs). In contrast to Article 12 of the Electronic Money Directive (Directive 2009/110/EC), this article stipulates specific prohibitions for EMT issuers and crypto-asset service providers. No Interest from EMT Issuers: In the first place, issuers of EMTs are expressly forbidden from granting interest related to EMTs. No Interest from Crypto-Asset Service Providers: Similarly, crypto-asset service providers, the entities that offer services related to crypto-assets, including EMTs, are also barred from offering interest when providing these services. Definition of Interest: For clarity, Article 50 goes a step further to define what would be considered as 'interest'. Under this provision, any remuneration or benefit related to the length of time a holder keeps an EMT is classified as interest. This could include net compensation or discounts that have an effect equivalent to that of interest. It could come directly from the issuer or third parties and might be directly associated with the EMT or from the remuneration or pricing of other products. The Crypto-Asset White Paper for E-Money Tokens Article 51 of MiCA regulation highlights the content and structure a crypto-asset white paper for e-money tokens (EMTs) must follow. This document is crucial as it provides potential holders with information about the EMT, the issuer, and the technology behind it. The details required in the white paper include: Information about the issuer: The issuer's details and its background should be clearly mentioned. About the EMT: Information regarding the EMT should be provided, including its functionalities and mechanisms. Public offer details: Clear and comprehensive data about the EMT's public offer and potential trading should be present. Rights and obligations: The white paper should detail the rights and obligations of holding the EMT. Underlying technology: It should also explain the technology supporting the EMT. Risk factors: Details about potential risks associated with the EMT should be given. Environmental impacts: The white paper should identify any significant adverse environmental impacts related to the consensus mechanism to issue the EMT. The paper also must identify any other party offering the EMT to the public or seeking its trading, along with the reason for their involvement. Fairness and clarity are essential in the white paper. All information must be truthful, clear, and not misleading. There should be no material omissions, and the information should be presented concisely. A prominent statement must appear on the first page, stating that any competent authority in the EU hasn't approved the paper and that the issuer is solely responsible for its content. In addition, the document should contain explicit warnings that the EMT isn't covered by investor compensation schemes or deposit guarantee schemes under EU directives. The white paper should also include a statement from the issuer's management body confirming that the document complies with MiCA and that, to their best knowledge, the information presented is complete, fair, and not misleading. A summary written in non-technical language, providing key information about the public offer or trading of the EMT, should be inserted after the management statement. This summary should be understandable, comprehensive, and laid out clearly, with a warning that decisions to purchase should be based on the entire white paper. A table of contents, date of its notification, and details about redemption conditions should also be included in the white paper. The document should be prepared in the official language of the home Member State or a language customary in the sphere of international finance. If the EMT is also offered in another Member State, the white paper must be prepared in that state's official or financial language. The white paper must be available in a machine-readable format, and the European Securities and Markets Authority (ESMA), in cooperation with the European Banking Authority (EBA), is tasked with developing standard forms and formats. Before the public offer or seeking admission to trading, the issuer should publish the white paper on its website and notify its competent authority at least 20 working days before its publication. It's important to remember that any significant new information or changes capable of affecting the assessment of the EMT should be reflected in a modified white paper, which should be notified to the authorities and published on the issuer's website. Liability of Issuers of E-Money Tokens Article 52 of the MiCA regulation addresses the responsibility and potential liability of issuers of e-money tokens (EMTs) concerning the information provided in a crypto-asset white paper. Here's a simplified breakdown: Issuer Liability: If an EMT issuer violates Article 51, by providing incomplete, unfair, unclear, or misleading information in the crypto-asset white paper or a modified version, both the issuer and the members of its administrative, management, or supervisory body are accountable to the EMT holder for any loss arising from this violation. Limitations on Liability: Any contractual conditions that seek to exclude or limit this civil liability won't have any legal effect. It implies that an issuer cannot limit or avoid their liability for the information provided in the white paper through any contractual agreements with the token holders. Evidence: The burden of proof is on the EMT holder. They need to provide evidence indicating that the issuer violated Article 51 by giving incomplete, unfair, unclear, or misleading information and that the holder's decision to buy, sell, or exchange the EMT was influenced by this information. Summary Information Liability: The issuer and its officials are not liable for losses suffered due to reliance on the information provided in a summary, including any translations, unless the summary is misleading, inaccurate, or inconsistent when read along with the other parts of the white paper or does not provide key information to assist prospective holders when deciding whether to buy the EMT. National Law: This article does not affect any other civil liability applicable under national law. Marketing Communications for E-Money Tokens Article 53 of the MiCA regulation presents rules regarding marketing communications related to e-money tokens (EMTs). It ensures clarity, fairness, and consistency in marketing practices. Requirements for Marketing Communications: Any marketing communication related to an offer to the public or the trading of EMTs must adhere to specific requirements: The marketing communication must be identifiable as a promotional activity. The information contained in the marketing communication must be fair, clear, and not misleading to the public. The details in the marketing communication must be consistent with the information presented in the crypto-asset white paper, the document outlining the issuer's plan for the digital asset. The marketing communication must also clearly state that a crypto-asset white paper has been published and provide the issuer's website address, a contact telephone number, and an email address. Right of Redemption Statement: All marketing communications must include an explicit statement that EMT holders have the right to redeem their tokens against the issuer at any time and at the tokens' face value. Publication of Marketing Communications: All marketing communications, including any modifications, should be published on the issuer's official website. Approval by Authorities: Competent authorities are not required to pre-approve marketing communications before publication. Notification to Authorities: However, issuers must be prepared to provide their marketing communications to competent authorities upon request. Timing of Dissemination: Marketing communications cannot be disseminated before the publication of the crypto-asset white paper. This restriction ensures potential investors can access the full white paper information before encountering promotional materials. This rule does not prevent issuers from conducting market soundings - gathering information on the interest of potential investors. Investment of Funds Received in Exchange for E-Money Tokens Article 54 of MiCA provides guidelines on how issuers of e-money tokens (EMTs) should manage and invest the funds they receive in exchange for their tokens. Funds Safeguarding: In line with Article 7(1) of Directive 2009/110/EC (the E-Money Directive), all funds received in exchange for EMTs must be safeguarded. This means that these funds must be protected and kept separate from other funds of the EMT issuer, ensuring they're readily available for redemption. Minimum Deposit Requirement: At least 30% of the received funds must be deposited into separate accounts in credit institutions. This provision ensures a portion of the funds is always readily available and is kept safe in a regulated institution. Investment of Remaining Funds: The remaining funds (i.e., 70% or less) should be invested in secure, low-risk assets. These assets should be: Highly liquid, meaning they can easily be sold or exchanged for cash without causing a significant change in their price. Carry minimal market, credit, and concentration risks, indicating they have a low chance of decreasing in value and do not focus the investments too heavily in one area. Denominated in the same official currency as the one referenced by the EMT. Wrapping Up Part One: Navigating E-Money Tokens We've just concluded the first installment of our guide on understanding e-money tokens under MiCA. The intricacies of this new legislation may be complex, but with each article, we aim to bring clarity and insight into this evolving landscape of digital finance. At Prokopiev Law Group, we pride ourselves on staying ahead of the curve in digital asset regulation. Our team keenly monitors the latest developments and is prepared to guide you through each step of your digital asset journey. Do you have questions or need assistance with a specific issue? Don't hesitate to reach out to us. We are eager to support you. Stay tuned for Part Two of our series on e-money tokens, where we'll continue our journey through the MiCA's provisions. Thank you for joining us in this first stage of the journey. Together, we're decoding the future of digital finance. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Welcome to our fourth part of exploring the Markets in Crypto-Assets (MiCA) regulation requirements for asset-referenced tokens. In this installment, we turn our focus towards significant asset-referenced token issuers. These tokens wield considerable influence within the market and, consequently, come under additional regulatory scrutiny. If you're new to our series or wish to revisit earlier parts, you can access Part 1, Part 2, and Part 3. Classification of asset-referenced tokens as significant Let's break down Article 43 of MiCA, which provides a roadmap to classifying asset-referenced tokens as 'significant.' The token in question must meet at least three of the following criteria: The token has more than 10 million holders. The value of the token, its market capitalization, or the issuer's reserve of assets exceeds EUR 5 billion. The average daily number and total value of transactions in the token during the relevant period exceed 2.5 million transactions and EUR 500 million, respectively. The token issuer is recognized as a gatekeeper in providing core platform services. The issuer's activities, including the use of the token for payments and remittances, are significant on an international scale. The token or its issuer is interconnected with the financial system. The issuer also issues at least one additional asset-referenced or e-money token and provides at least one crypto-asset service. If multiple issuers issue the same token, the classification is based on aggregated data from all issuers. The European Banking Authority (EBA) classifies a token as significant when it meets these criteria either following authorization or during two consecutive reporting periods. Once a token is classified as significant, supervisory responsibilities are transferred from the issuer's home Member State's competent authority to the EBA. This classification and associated supervisory responsibilities are reassessed annually. The Commission will determine further specifications of the criteria for a token to be classified as significant through delegated acts. Voluntary classification of asset-referenced tokens as significant Article 44 of MiCA sets out the provisions regarding the voluntary classification of asset-referenced tokens as significant asset-referenced tokens. These provisions are essential as they allow issuers to opt for their tokens to be recognized as significant, opening up a different regulatory landscape. Issuers can express their desire for their asset-referenced tokens to be deemed significant. This desire is to be notified immediately to the European Banking Authority (EBA), the European Central Bank (ECB), and, in certain cases, the central bank of the issuer's home Member State. For an asset-referenced token to be voluntarily classified as significant, the issuer must illustrate, through a detailed program of operations, that it will likely meet at least three of the criteria specified above. Upon receiving such a request, the EBA has 20 working days to prepare a draft decision based on the operational program, determining whether the token fulfills or is likely to fulfill the necessary criteria. This draft is then notified to the competent authority of the issuer's home Member State, the ECB, and, in certain cases, to the central bank of the Member State. All these authorities have 20 working days to provide observations and comments on the draft decision. The EBA will duly consider these before arriving at a final decision. The final decision is made within 60 working days of the initial notification, which is immediately conveyed to the issuer and its competent authority. If a token is classified as significant, the supervisory responsibilities shift from the competent authority to the EBA on the authorization date or when the crypto-asset white paper is approved. Specific Obligations Article 45 of MiCA deals with additional specific obligations that issuers of significant asset-referenced tokens must comply with. This extends to the basic requirements, with increased scrutiny given the potential systemic risks such tokens pose. Issuers of significant asset-referenced tokens must formulate, implement, and maintain a remuneration policy that encourages robust and efficient risk management. This policy must not incentivize the relaxation of risk standards. The issuers must ensure these tokens can be held in custody by various authorized crypto-asset service providers. This includes service providers outside of their group and should be done fairly, reasonably, and non-discriminately. Monitoring liquidity needs is vital. The issuers must assess and continuously keep track of liquidity requirements to fulfill token redemption requests. A comprehensive liquidity management policy and procedures should be implemented to maintain a resilient liquidity profile capable of withstanding stressful scenarios. Regular liquidity stress tests need to be conducted by these issuers. Depending on these tests, the European Banking Authority (EBA) might decide to bolster liquidity requirements. The stress test must cover all activities if an issuer offers more than one token or provides other crypto services. The reserve requirement percentage stated in Article 35(1) (own funds requirements) is set at 3% of the average reserve assets amount for these issuers. If multiple issuers offer the same significant token or an issuer offers multiple tokens with at least one classified as significant, all the above apply to each issuer. The EBA, in cooperation with the European Securities and Markets Authority (ESMA), will develop regulatory technical standards that specify the minimum requirements of the remuneration policy, liquidity management policy, and liquidity requirements, including setting a minimum deposit amount in each official currency. Furthermore, it will detail the process and timeframe for an issuer to adjust the amount of its own funds. Lastly, EBA, ESMA, and the European Central Bank (ECB) will issue guidelines for the common reference parameters of stress test scenarios to be included in the stress tests. These guidelines will be periodically updated, considering the latest market developments. * * * Comprehending the intricacies of MiCA can be a complex task, given its technical legal language and detailed stipulations. But remember, you're not in this alone. At Prokopiev Law Group, we specialize in demystifying these legal complexities for you. Whether you're an existing blockchain business, a startup looking to break into the crypto space, or an investor wanting to make sure your investments are legally protected, we're here to help you navigate through the ever-evolving digital asset landscape. Our objective is to empower you with the right legal intelligence so you can focus on what you do best - innovating and growing in the crypto space. Together, let's build a compliant, robust, and successful future in the digital asset universe. With Prokopiev Law Group at your side, rest assured, you're always a step ahead in your crypto journey. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Welcome to the third part of our exploration of the Markets in Crypto-assets (MiCA) regulations pertaining to asset-referenced tokens. Our journey has delved into the importance of organizational structure, risk management processes, financial requirements, and much more. You might find reading Part One and Part Two beneficial if you're just joining us. In today's discourse, we will unravel the intricacies of the reserve of assets requirement, a cornerstone provision critical in promoting asset-referenced tokens' stability. It's a complex topic that's crucial to understanding the intricate web of compliance and accountability that the MiCA legislation weaves. Reserve of Assets Obligation for Issuers of Asset-Referenced Tokens under MiCA Article 36 of MiCA lays out the essential requirements related to the obligation of asset-referenced token issuers to maintain a reserve of assets. It details how these reserves should be structured and managed, including the specific composition, segregation, valuation, and audit requirements. Reserve of Assets: Issuers of asset-referenced tokens must always establish and maintain a reserve of assets. This reserve should be managed in a way that (a) covers the risks associated with the assets referenced by the tokens; addresses liquidity risks linked to the permanent rights of token holders' redemption. Legal Segregation: In the best interest of the token holders, the reserve of assets must be legally separate from the issuer's estate and the reserves of other asset-referenced tokens. Operational Segregation: The reserve of assets must also be operationally segregated from the issuer's estate and the reserves of other tokens. Regulatory Technical Standards: The European Banking Authority (EBA), in cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), is tasked with developing regulatory technical standards to specify liquidity requirements further. These will include (a) guidelines for daily and weekly liquidity; (b) techniques for liquidity management; (c) minimum deposit amounts in each official currency. Multiple Tokens and Issuers: Issuers that offer multiple asset-referenced tokens must operate separate reserves for each token. Similarly, different issuers offering the same token should maintain only one reserve. Effective Management: The issuer's management body must ensure the effective and prudent management of the reserve, matching the issuance and redemption of tokens with a corresponding increase or decrease in the reserve. Valuation: The reserve's aggregate value should be determined using market prices and at least equal the total value of claims against the issuer from circulating tokens. Stabilization Mechanism Policy: Issuers must have a clear policy outlining the stabilization mechanism of their tokens. This policy should cover several elements, including the assets referenced, risks, issuance and redemption procedures, investment policy, and more. Audits: An independent audit of the reserve of assets is required every six months. Audit results must be reported to the competent authority and made public, except in specific circumstances that may require a delay in publication. Valuation Methodology: Valuation at market prices should be conducted using the mark-to-market method when possible. When not possible, or if the market data isn't of good quality, a more conservative mark-to-model method is recommended. Custody of reserve assets Article 37 of the MiCA regulation deals with the custody of reserve assets by issuers of asset-referenced tokens. In layman's terms, this provision regulates how the companies that issue tokens representing some underlying value must manage and protect the assets that back up these tokens. This is to ensure that the value of the tokens remains stable and the interests of the token holders are safeguarded. 1. Custody Policies Companies that issue asset-referenced tokens must have policies to ensure that they always maintain control of the reserve assets backing the tokens. This includes ensuring the assets are not encumbered or used as financial collateral. These companies must be able to access the reserve assets quickly to meet any redemption requests from the token holders. Companies must avoid situations where custody of the reserve assets is concentrated with one custodian or where the reserve assets are concentrated in one area. 2. Multiple Tokens and Issuers If a company issues more than one type of asset-referenced token, it must have a separate custody policy for each reserve of assets. Multiple companies can maintain a single custody policy if they issue the same asset-referenced token. 3. Holding Reserve Assets Depending on the nature of the reserve assets, reserve assets must be held in custody by specific types of institutions, including crypto-asset service providers, credit institutions, or investment firms. This custody should be established five working days after the date of issuance of the asset-referenced token. 4. Due Diligence in the Selection of Custodians Companies must exercise due diligence when selecting and reviewing the custodians of their reserve assets. Custodians must be different from the issuer and should have the necessary expertise and reputation to act respectively. Companies must ensure that the reserve assets held in custody are protected against claims of the custodians' creditors. 5. Selection and Review of Custodians Custody policies should outline the criteria for selecting custodians and the process for reviewing these appointments. Companies should regularly review their custodian appointments, considering their exposure to the custodians and monitoring their financial conditions. 6. Custody Manner Custodians must follow specific rules when holding assets in custody, depending on the type of the reserve asset. All reserve assets should be identifiable as belonging to each reserve of assets. 7. Contractual Arrangements The appointment of custodians should be evidenced by a contractual arrangement, which regulates the flow of information necessary for them to perform their functions. 8. Honesty and Fairness Custodians should act honestly, fairly, professionally, independently, and in the interest of the issuers and the holders of asset-referenced tokens. 9. Conflict of Interest Custodians should not engage in activities that could create conflicts of interest unless they have properly separated their custody tasks from their potentially conflicting tasks and the potential conflicts of interest have been properly identified, monitored, managed, and disclosed. 10. Loss of Assets In case of a loss of a financial instrument or a crypto-asset held in custody, the custodian that lost the asset must compensate the issuer without undue delay unless the loss occurred due to an external event beyond their control. Investment of reserve assets by the issuers of asset-referenced tokens Investment Parameters: Issuers who wish to invest a portion of their reserve assets can do so, but certain stipulations bind them. Investments must be limited to highly liquid financial instruments, meaning they can be quickly and easily converted to cash without significant loss in value. These instruments must also demonstrate minimal market, credit, and concentration risks. Undertakings for Collective Investment in Transferable Securities (UCITS): Assets invested in UCITS are presumed to possess minimal market, credit, and concentration risks. This is only valid if the UCITS invests solely in assets specified by the European Banking Authority (EBA) and the issuer has taken steps to minimize concentration risk. Custody of Invested Assets: All financial instruments in which the reserve assets are invested must be held in custody. Profit, Loss, and Risk: Any gains or losses resulting from the investment of the reserve assets are solely the responsibility of the issuer of the asset-referenced token. This includes fluctuations in the value of the financial instruments and any counterparty or operational risks. Regulatory Technical Standards: In cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), the EBA will create technical regulatory standards detailing the highly liquid financial instruments bearing minimal risks. These standards will consider the different types of assets that an asset-referenced token can reference and the correlation between those assets and the highly liquid financial instruments the issuers might invest in. Constraints will be imposed on the concentration to prevent the issuer from investing or holding in custody more than a certain percentage of reserve assets in any one entity or group. Redemption rights of holders of asset-referenced tokens Permanent Right of Redemption: Holders of asset-referenced tokens have a continuous right to redemption against the token issuers. This right also extends towards the reserve assets if the issuers are unable to fulfill their obligations. Issuers must develop, sustain, and enforce precise policies and procedures about this right of redemption. Redemption Process: When a token holder requests redemption, the issuer must either repay an amount equivalent to the market value of the referenced assets or deliver the assets themselves. This amount will be paid in funds other than electronic money. Issuers need to establish a policy detailing: The specific conditions, such as thresholds, periods, and timeframes, for exercising the right of redemption. The mechanisms and procedures to guarantee token redemption, even under stressed market circumstances, as well as during the implementation of a recovery plan or an orderly redemption. The valuation principles of the tokens and reserve assets upon redemption. The settlement terms for the redemption. The steps issuers take to manage fluctuations in the reserve assets to prevent any negative market impacts. Suppose issuers accept payment in funds other than electronic money, denominated in an official currency when selling a token. In that case, they must always offer an option to redeem the token in the same official currency. It is crucial to note that the redemption of asset-referenced tokens should not be subject to any fees except as provided in Article 46 of MiCA (recovery plans regulation). Granting interest in relation to asset-referenced tokens No Interest on Tokens: Issuers of asset-referenced tokens are expressly prohibited from granting any form of interest in connection with these tokens. Crypto-Asset Service Providers: The restriction also applies to crypto-asset service providers. When providing services related to asset-referenced tokens, these providers are also forbidden from granting interest. Definition of Interest: The term 'interest' is broadly defined here. Any compensation, benefit, or financial advantage related to the length of time a holder retains asset-referenced tokens is treated as interest. This includes net compensation, discounts, or similar financial benefits with the same impact as interest. Whether it's received directly from the issuer or third parties, and whether it's directly associated with the token or from the remuneration or pricing of other products - if it benefits the token holder in a way equivalent to receiving interest, it's treated as such. * * * That wraps up the third part of our detailed analysis of MiCA's provisions for asset-referenced tokens. Next time, we'll continue our journey through MiCA's comprehensive regulatory framework, shedding light on more legal intricacies and provisions. Stay tuned for the upcoming parts, where we continue to simplify and demystify the MiCA for you. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

Welcome back to our comprehensive exploration of the Markets in Crypto-assets (MiCA) regulation! If you've missed out on our earlier discussion, no worries, you can catch up on Part 1 right here. We will focus more on asset-referenced tokens as we continue our journey through this vital regulatory framework. This segment will provide an in-depth understanding of more legal nuances associated with these tokens, their issuance, and the responsibilities of issuers, all under the scope of MiCA. The Revocation of Authorization for Asset-Referenced Tokens Issuers Under MiCA's framework, the authorization granted to issuers of asset-referenced tokens isn't perpetual and can be withdrawn under certain circumstances. This measure aims to maintain the crypto market's integrity and protect token holders' interests. Let's delve into the situations that can lead to the revocation of this authorization: Inactivity: If the issuer hasn't conducted any business for six months straight or hasn't utilized its authorization for a year, the competent authority can withdraw the authorization. Irregular Obtention: The authorization can be rescinded if the issuer acquired its authorization through improper methods, such as by providing false information in the application or the crypto-asset white paper. Non-compliance: If the issuer no longer meets the conditions under which the authorization was given or if the issuer seriously breaches the provisions of this MiCA. Redemption Plan: The authorization can be rescinded if the issuer has been subjected to a redemption plan. Ceasing Operations: If the issuer voluntarily renounces its authorization or decides to cease operations. Threat to Market Integrity: If the issuer's activities pose a significant risk to market integrity, financial stability, smooth operation of payment systems, or expose the issuer or the sector to severe money laundering and terrorist financing risks. Moreover, if the European Central Bank (ECB) or the relevant central bank opines that the asset-referenced token poses a significant threat to the smooth operation of payment systems, monetary policy transmission, or monetary sovereignty, the competent authority can withdraw the issuer's authorization. The competent authorities also may limit the amount of asset-referenced tokens to be issued or set a minimum denomination amount for the asset-referenced token. Indeed, the presence of asset-referenced tokens in financial systems can have significant implications for monetary policy and financial stability. For instance, if a token becomes widely adopted, it could influence the transmission mechanism of monetary policy or affect the functioning of payment systems. Moreover, in extreme cases, it could challenge the sovereignty of monetary policy if it starts replacing the national currency for a large number of transactions. Under the ECB or the relevant central bank opinion, the competent authority must either withdraw the issuer's authorization or impose restrictions to tackle such situations. It signals a clear message that the era of free crypto-assets circulation ends, and now crypto projects shall co-exist with traditional financial structures on an unequal basis. This significant development shows that the EU is taking crypto-assets very seriously. Modifying Crypto-Asset White Papers for Asset-Referenced Tokens Issuers of asset-referenced tokens must notify their competent authority in the home Member State about any planned changes to their business model, which might significantly influence the decision-making of current or potential token holders. Such changes include (non-exclusive list): Adjustments to governance arrangements, including reporting lines to the management body and risk management framework. Alterations to the reserve assets and the custody of these assets. Changes to the rights granted to asset-referenced token holders. Modifications to the method of issuance and redemption of the asset-referenced tokens. Updates to the transaction validation protocols for the asset-referenced tokens. Changes to the functioning of the issuer's proprietary distributed ledger technology (where applicable). Changes to mechanisms ensuring the liquidity of the asset-referenced tokens, including the liquidity management policy for issuers of significant asset-referenced tokens. Modifications to arrangements with third-party entities regarding reserve asset management, investment of the reserve, custody of reserve assets, and the distribution of tokens to the public (if applicable). Changes to the complaints-handling procedures. Updates to the risk assessment for money laundering and terrorist financing and related policies and procedures. These planned changes must be notified to the competent authority 30 working days before they are due to take effect. Once any such change is notified, the issuer must then draft a modified crypto-asset white paper, maintaining the consistency of information order with the original white paper. This draft must then be notified to the competent authority of the issuer's home Member State. Upon receipt, the authority must electronically acknowledge the receipt within five working days and approve or refuse the modified white paper within 30 working days from the acknowledgment of receipt. During the examination period, the competent authority may request additional information, explanations, or justifications concerning the draft. Liability of Issuers of Asset-Referenced Tokens for the Information Provided in a Crypto-Asset White Paper Issuers of asset-referenced tokens are legally responsible for the accuracy and clarity of information provided in their crypto-asset white papers, including any modified versions. Here are the key points: If an issuer provides incomplete, unfair, unclear, or misleading information in its crypto-asset white paper, they and their administrative, management, or supervisory body members are liable for any loss incurred due to this infringement. This liability applies to a holder of the asset-referenced tokens who has suffered the loss. Any attempt to exclude or limit this civil liability through contractual arrangements will be rendered legally ineffective. This rule ensures that issuers cannot evade their responsibilities to provide accurate and clear information. The burden of proof in such cases rests with the token holder. They must present evidence indicating issuers violation by providing incomplete, unfair, unclear, or misleading information, and that this information influenced the token holder's decision to purchase, sell, or exchange the asset-referenced tokens. However, issuers and their administrative, management, or supervisory body members are not liable for losses from reliance on a white paper summary, including any translations of it. The exceptions to this are if the summary is misleading, inaccurate, or inconsistent when read alongside the other parts of the crypto-asset white paper or if it does not provide key information that would help prospective holders decide whether to purchase the asset-referenced tokens when read in conjunction with the rest of the white paper. Lastly, the issuer may also be held accountable under specific national laws in addition to the liabilities stated in MiCA. Issuers' Obligations and Publication of the Crypto-Asset White Paper MiCA legislation outlines specific standards of conduct that issuers of asset-referenced tokens must adhere to and sets rules for publishing the crypto-asset white paper. Obligation to Act Honestly, Fairly, and Professionally: Issuers are obligated to act honestly, fairly, and professionally. Their communication with current and potential holders of asset-referenced tokens should always be clear, fair, and not misleading. The best interests of the token holders must be at the heart of the issuers' actions. This means that issuers should prioritize the holders' interests over their own or other competing interests. All token holders should be treated equally. However, there might be instances where certain holders receive preferential treatment. If that's the case, this must be disclosed in the crypto-asset white paper and, where applicable, in marketing communications. Publication of the Crypto-Asset White Paper: Approved crypto-asset white paper and modified versions should be published on the issuer's website. The crypto-asset white paper must be publicly accessible by the start date of the asset-referenced token's public offer, the asset-referenced token, or the token's admission to trading. The approved crypto-asset white paper and, where applicable, the modified version should remain available on the issuer's website as long as the public holds the asset-referenced token. Marketing Communications, Ongoing Information, and Complaints-handling Procedures Requirements for marketing communications: These communications must be readily identifiable as marketing material, and their content should be fair, clear, and not misleading. They must align with the information presented in the crypto-asset white paper. They should state that a crypto-asset white paper has been published, providing the issuer's website address, telephone number, and email for contact. A clear statement must be included indicating that token holders can redeem their tokens from the issuer at any time. Any modifications to marketing communications should be published on the issuer's website. Marketing communications must be provided to competent authorities upon request. No marketing communication should be disseminated before the publication of the crypto-asset white paper, though this doesn't affect the issuer's ability to conduct market soundings. For the continuous provision of information to token holders: Issuers should publicly disclose on their website, clearly, accurately, and transparently, the number of asset-referenced tokens in circulation, and the value and composition of the reserve assets. They should publish a summary of the audit report related to the reserve of assets and the full, unedited audit report on their website as soon as possible. Any event that could significantly impact the value of the tokens or the reserve of assets should be disclosed promptly and transparently on the issuer's website. Regarding the handling of complaints: Issuers should establish and maintain effective and transparent procedures for addressing complaints from token holders and other interested parties, including consumer associations representing token holders. If tokens are distributed partially or entirely by third-party entities, issuers should also facilitate handling complaints between token holders and these entities. Token holders should be able to lodge complaints with the issuers or, where applicable, with third-party entities free of charge. Issuers and, where applicable, third-party entities should develop a template for filing complaints and keep a record of all received complaints and the actions taken in response. Issuers should investigate all complaints promptly and fairly and communicate the results of these investigations to token holders within a reasonable period. Conflicts of Interest Issuers must set up and maintain policies and procedures to identify, prevent, manage, and disclose conflicts of interest. These conflicts of interest may arise between the issuer and any of the following parties: Their shareholders or members. Any direct or indirect shareholder or member with a significant holding in the issuers. The members of their management body. Their employees. The holders of asset-referenced tokens. Third party entities for operating the reserve of assets, and for the investment of the reserve assets, the custody of the reserve assets and, where applicable, the distribution of the asset-referenced tokens to the public. Regarding disclosure, issuers must clearly display the general nature and sources of these conflicts of interest on their website and the steps taken to mitigate them. This disclosure should be detailed enough to enable prospective token holders to make an informed decision about purchasing the asset-referenced tokens. Governance Arrangements MiCA stipulates the governance arrangements for issuers of asset-referenced tokens, covering a wide range of responsibilities. Key points to note are: Issuers must have robust governance structures, including a clear organizational structure with well-defined and transparent lines of responsibility. They should also have effective procedures to identify, manage, monitor, and report risks, alongside sound administrative and accounting procedures. The management body members must have a good reputation and possess appropriate knowledge, skills, and experience. They should not have any criminal records related to money laundering, terrorist financing, or any other offenses that could tarnish their reputation. They should also be able to commit enough time to their duties effectively. The management body should regularly assess and review the effectiveness of the policy arrangements and procedures. Shareholders or members with significant holdings in the issuers should also have a good reputation. Issuers must adopt policies and procedures to ensure compliance with MiCA. These should include policies and procedures on: Reserve of assets Custody of the reserve assets Rights granted to token holders Issuance and redemption of tokens Transaction validation protocols Functioning of the issuer's proprietary distributed ledger technology Ensuring the liquidity of tokens Arrangements with third-party entities for operating the reserve of assets Issuers' consent given to others that might offer or seek admission to trading the tokens Handling of complaints Conflicts of interest The issuer must have appropriate and proportionate systems, resources, and procedures to ensure their services' regular performance and safeguard data availability, authenticity, integrity, and confidentiality. If an issuer discontinues its services and activities, it must submit a plan to the competent authority for approval. Lastly, issuers must ensure regular audits by independent auditors, with the audit results being communicated to the issuer's management body and made available to the competent authority. Own Funds Requirements Issuers of asset-referenced tokens must maintain own funds that are at least equal to the highest of the following: €350,000. 2% of the average amount of the reserve of assets over the preceding six months. A quarter of the fixed overheads from the preceding year. If an issuer offers more than one type of asset-referenced token, the own funds should represent the sum of the average amount of the reserve assets backing each token. The own funds should consist of the Common Equity Tier 1 items and instruments, as referred to in Regulation (EU) No 575/2013, with full deductions applied. The competent authority in the issuer's home country may require the issuer to hold up to 20% more own funds than calculated by the rules mentioned earlier if assessments indicate a higher risk. The evaluation of risk can be based on factors such as the issuer's risk management processes, the quality, and volatility of the reserve assets, the rights granted to token holders, investment policy risks, the value and number of transactions settled in the token, the importance of the markets where the token is offered, and the market capitalization of the token. Issuers must conduct regular stress tests considering severe financial and non-financial stress scenarios. The competent authority may require the issuer to hold between 20% and 40% more own funds depending on the results. The European Banking Authority (EBA), in cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), is tasked with developing regulatory standards to specify the procedures for adjusting to higher own funds requirements, the criteria for requiring a higher amount of own funds, and the minimum requirements for the design of stress testing programs. * * * We've now reached the conclusion of our in-depth exploration of the MiCA regulation concerning asset-referenced tokens. We hope this breakdown has made these complex legal provisions more understandable and accessible. In case you missed it, here's a link to the first part of our analysis on asset-referenced tokens under MiCA. And stay tuned because we're just getting started! In the next part of our series, we will delve into more intricate details and nuances of MiCA, continuing our journey through this critical regulation. Understanding regulations like MiCA is essential for anyone involved in the crypto asset industry. However, these texts can be dense and difficult to navigate, which is where we come in. We're here to help you make sense of these regulations and ensure that you understand the implications for your business or investment decisions. We're your reliable partner in navigating the complex landscape of crypto asset legislation. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The Markets in Crypto-Assets (MiCA) regulation is poised to bring far-reaching changes to the European Union's crypto-asset markets. This comprehensive framework aims to create a harmonized environment for issuing, offering, and providing services related to crypto-assets across the Union. In this article, we delve into one particular category of crypto-assets under MiCA—Asset-Referenced Tokens (ARTs)—and analyze the key regulatory provisions and their implications for issuers and service providers. Authorization for Asset-Referenced Tokens Only issuers of an asset-referenced token may bring it to market or seek its listing for trading within the EU. They must satisfy one of two conditions: First, they could be a legally recognized entity or another type of enterprise that has been established in the EU and holds authorization in line with Article 21 from their home Member State's competent authority. Alternatively, they could be a credit institution that adheres to the provisions of Article 17 of MiCA. The text of Article 16 also carves out a notable exception. With the token issuer's written consent, other individuals or entities can offer the asset-referenced token to the public or attempt to get it listed for trading. But they must ensure compliance with Articles 27 (Obligation to act honestly, fairly and professionally), 29 (Marketing communications requirements), and 40 (Prohibition of granting interest) of MiCA. MiCA takes an inclusive approach, granting 'other undertakings' the ability to issue asset-referenced tokens. However, depending on their legal form, they must offer a similar level of protection to third-party interests as legal entities and be subject to a similar level of prudential supervision. An issuer may not seek authorization if the average outstanding value of the token issued by an issuer doesn't surpass EUR 5 million (or an equivalent amount in another official currency) over 12 months, and the issuer is not connected to a network of other exempt issuers. Additionally, if the asset-referenced token is exclusively offered to, and can only be held by, qualified investors. However, even in these cases, issuers must still produce a crypto-asset white paper in compliance with Article 19 and submit it to the competent authority in their home Member State. An essential point to note is that the authorization granted to a person under this Article is recognized throughout the Union, allowing the issuer to offer their asset-referenced token across all Member States. Applying for Authorization of Asset-Referenced Tokens Article 18 of MiCA is the go-to guide for legal entities or other undertakings intending to introduce asset-referenced tokens to the public or seek their admission for trading. It starts by detailing the requirement for entities to submit an authorization application, as stipulated in Article 16, to their home Member State's competent authority. The application should include the following information: Applicant issuer's address and legal entity identifier. Applicant issuer's articles of association, if applicable. A program of operations outlining the intended business model. A legal opinion confirming that the asset-referenced token is neither a crypto-asset excluded from the scope of the regulation nor an e-money token. A comprehensive description of the applicant issuer's governance arrangements. If applicable, the internal control mechanisms and procedures, particularly those concerning money laundering and terrorist financing prevention, in cooperation with specific crypto-asset service providers. Identify the applicant issuer's management body members, with proof of their good repute and appropriate management skills. Proof of good repute of any direct or indirect shareholder or member with a qualifying holding in the applicant issuer. A crypto-asset white paper as per Article 19. Policies and procedures related to the issuer's operations. Description of contractual arrangements with third-party entities. Applicant issuer's business continuity policy. The internal control mechanisms and risk management procedures. Systems and procedures to ensure data availability, authenticity, integrity, and confidentiality. Applicant issuer's complaints-handling procedures. If applicable, a list of host Member States where the asset-referenced token is intended to be offered or for trading admission. If an issuer has already been authorized for one asset-referenced token, they need not re-submit information for another token. However, they must confirm that the non-resubmitted information remains up-to-date. To support the application, the issuer must provide proof of absence of criminal records or penalties related to commercial law, insolvency law, financial services law, anti-money laundering, counter-terrorist financing, fraud, or professional liability for all members of the management body and shareholders with qualifying holdings. Further, the European Banking Authority (EBA), in collaboration with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), is tasked with developing regulatory technical standards to specify the information required in the application, as well as implementing technical standards to standardize forms, templates, and procedures for uniformity across the Union. White Paper Article 19 of MiCA provides clear guidelines on the content and form of a crypto-asset white paper when it comes to asset-referenced tokens. Here's a simplified breakdown of what it entails: A crypto-asset white paper must contain detailed information about the following: The issuer of the asset-referenced token. The asset-referenced token itself. The public offering or trading of the asset-referenced token. The rights and obligations attached to the asset-referenced token. The underlying technology used. The risks associated with the asset-referenced token. The reserve of assets. Any adverse impacts on the climate or environment caused by the consensus mechanism used to issue the token. If someone other than the issuer is offering the token or seeking its admission to trading, their identity and the reasons for their involvement. All this information must be fair, clear, not misleading, and should not contain any material omissions. It should also be presented in a concise and comprehensible manner. The white paper must explicitly state that the asset-referenced token may lose value, may not always be transferable, may lack liquidity, and is not covered by investor compensation or deposit guarantee schemes under certain EU directives. It should also include a confirmation from the issuer's management body that the white paper complies with the legal requirements and is accurate to the best of their knowledge. The white paper should have a summary that briefly explains key information in non-technical language to help prospective holders make informed decisions. It must also carry warnings about relying solely on the summary and the nature of the offer. It should also mention the date of its notification and include a table of contents. It should be made available in an official language of the home Member State or in a language customary in international finance. In case the token is also offered in another Member State, it must be made available in the official language of that state too. The white paper should be available in a machine-readable format. ESMA (European Securities and Markets Authority), in cooperation with EBA (European Banking Authority), will develop standard forms, formats, and templates for the white paper. ESMA will also develop regulatory technical standards on the content, methodologies, and presentation of information about sustainability indicators concerning adverse impacts on the climate and other environment-related adverse impacts. This is to take into account the different types of consensus mechanisms used, their incentive structures, the use of energy and natural resources, waste production, and greenhouse gas emissions. Granting or Refusing Authorization Article 21 of MiCA outlines the process for granting or refusing authorization to an applicant issuer. Here's a summary of its key points: The competent authorities must make a fully reasoned decision to grant or deny authorization to an applicant issuer within 25 working days of receiving opinions EBA and ESMA, if applicable (as specified in Article 20(5)). They must notify the applicant issuer of this decision within five working days. If the applicant issuer is authorized, their crypto-asset white paper is automatically approved. The competent authorities must refuse authorization if there are objective and demonstrable grounds for the following: The applicant issuer's management body may threaten its effective, sound, and prudent management, its business continuity, or the consideration of its clients' interests and market integrity. The management body members do not meet the criteria specified in Article 34(2). Shareholders and members with qualifying holdings do not meet the good reputation criteria set out in Article 34(4). The applicant issuer fails to meet or is likely to fail to meet any of the requirements under MiCA. The applicant issuer's business model seriously threatens market integrity, financial stability, and smooth operation of payment systems or exposes the issuer or the sector to significant risks of money laundering and terrorist financing. The competent authorities must also refuse authorization if the European Central Bank (ECB) or the applicable central bank gives a negative opinion based on the "risk posed to the smooth operation of payment systems, monetary policy transmission, or monetary sovereignty." Reporting Requirements If an organization issues tokens worth more than 100 million Euros, it must report certain information every three months to the relevant authority. This information includes: How many people hold the token. The value of the tokens issued and the size of the reserve assets. The daily average of transactions, both in terms of number and total value during the quarter. An estimate of the daily average of transactions that are related to the token being used as an exchange medium within a single currency area. In this context, "transaction" means any change in who has the right to the asset-referenced token resulting from the transfer of the token from one digital ledger account to another. Transactions that involve exchanging the token for funds or other crypto-assets with the issuing organization or a crypto-asset service provider aren't considered as use of the token as a medium of exchange unless there's evidence that the token is being used to settle transactions in other crypto-assets. If an organization issues tokens worth less than 100 million Euros, the relevant authority can still require it to comply with these reporting requirements. Service providers dealing with asset-referenced tokens must give the issuer the information they need to prepare the report. This includes information on transactions that occur outside the digital ledger. The ECB and other central banks may provide their own estimates of the average daily number and total value of transactions related to the use of the token as an exchange medium within a single currency area. The European Banking Authority (EBA), working closely with the ECB, will create draft regulatory technical standards. These standards will detail how to estimate the average daily number and total value of transactions that use the token as an exchange medium within a single currency area. The EBA will also develop draft implementing technical standards. These will set out standard forms, formats, and templates for the reporting and information provision. Restrictions Article 23 of MiCA introduces restrictions on the issuance of asset-referenced tokens that are widely used as a means of exchange. If the average daily number and value of transactions for an asset-referenced token within a single currency area exceed 1 million transactions and 200 million Euros respectively, over a quarterly period, the issuer must take action. Specifically, they must: Cease issuing that particular asset-referenced token. Within 40 working days of reaching the threshold, submit a plan to the competent authority outlining how they will keep the average daily number and value of transactions below the specified limits. The competent authority determines whether the threshold has been reached by using the highest figures from either the information provided by the issuer, their own estimates, or estimates provided by the European Central Bank (ECB) or another applicable central bank. In cases where multiple issuers issue the same asset-referenced token, the competent authority assesses whether the threshold is reached by aggregating data from all issuers. The plan submitted by the issuer to the competent authority must be approved. If necessary, the competent authority can require changes to the plan, such as setting a minimum denomination amount, to ensure a timely decrease in the token's use as a means of exchange. The competent authority will only allow the issuer to resume issuing the asset-referenced token when there is evidence that the average daily number and value of transactions within a single currency area is below 1 million transactions and 200 million Euros, respectively, over a quarterly period. * * * This concludes Part 1 of our asset-referenced tokens analysis under the Markets in Crypto-Assets (MiCA) regulation. We've broken down some complex legal provisions into more digestible information, but the journey continues. In the upcoming Part 2, we'll continue to delve deeper into more details to help you better understand this comprehensive legal framework. Remember, staying informed is key in navigating the dynamic landscape of crypto-assets. So, please tune in for our next installment to keep yourself ahead of the curve in this rapidly evolving field. Until then, continue exploring, learning, and growing in the world of digital assets! DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The Markets in Crypto Assets (MiCA) regulation has been a topic of intense discussion in the European Union. While it promises to bring much-needed clarity to the regulatory landscape of crypto assets, many experts believe that MiCA may already need to be updated in terms of its scope. This is because it fails to address more recent developments in blockchain applications, such as Non-Fungible Tokens (NFTs), Decentralized Finance (DeFi), Web 3, and algorithmic stablecoins. DeFi refers to financial services that are managed in a decentralized manner on a blockchain, using smart contracts to automate transactions. Some popular DeFi tools include decentralized exchanges (DEXs), lending platforms, and algorithmic stablecoins. These services offer advantages over traditional finance, such as increased accessibility, anonymity, reduced transaction costs, and faster execution of services. However, the multifaceted and complex nature of DeFi, along with the emerging concept of Decentralized Autonomous Organizations (DAOs), creates challenges for legislators and regulators in drafting clear definitions and rules. DAOs, for example, blur the line between active managers and passive token holders, making it difficult to determine the appropriate regulatory approach. MiCA Scope and Applicability in the Context of Decentralization Recital 22 of the MiCA regulation outlines the applicability of the regulation to various entities, services, and activities within the crypto-asset ecosystem. The recital emphasizes the following key points: Applicability to Natural and Legal Persons: MiCA applies to both natural and legal persons and certain other undertakings involved in the crypto-asset industry. The regulation governs the services and activities performed, provided, or controlled by these entities, directly or indirectly. Decentralized Services and Activities: MiCA acknowledges that some crypto-asset services and activities may be performed in a decentralized manner. The regulation applies to such decentralized activities when they are, in part or in whole, controlled or provided by an intermediary. Fully Decentralized Services: If a crypto-asset service is provided in a fully decentralized manner without any intermediary, it is excluded from the scope of MiCA. This provision underscores the regulation's limitation in addressing the complexities of DeFi and DAOs, as previously discussed. Crypto-assets with No Identifiable Issuer: Titles II, III, or IV of MiCA (regulation of asset-referenced tokens, e-money tokens, and other crypto-assets) do not apply to crypto-assets with no identifiable issuer. However, crypto-asset service providers offering services related to such crypto-assets are still subject to the regulation. "Other undertakings" under MiCA In the context of MiCA, "other undertakings" refers to entities involved in the crypto-asset ecosystem but do not fall under the category of natural or legal persons. These undertakings may engage in crypto-asset-related activities or services and are thus subject to the regulation. The term "undertaking" is consistently used throughout the MiCA text and can be found in Articles 2 (Scope), 3 (Definitions), in the definitions of "offeror" and "crypto-asset service provider," but is not explicitly defined in MiCA. Still, it is commonly used in EU law to describe an economic unit engaged in economic activity, irrespective of its legal form. The Treaty on the Functioning of the European Union (TFEU), particularly in the context of competition law, uses the term "undertaking" to refer to any entity engaged in economic activities, whether it is a sole trader, a partnership, a corporation, or any other form of business organization. In the case of MiCA, "other undertakings" could include entities that are not legal persons but still play a role in the crypto-asset space, such as partnerships, unincorporated associations, or other non-corporate entities involved in issuing or managing crypto-assets, providing crypto-asset services, or carrying out other related activities. While the term "undertaking" is broad and encompasses various types of entities involved in the crypto-asset ecosystem, it does not extend to fully decentralized entities. MiCA explicitly excludes fully decentralized systems or services that operate without any intermediary from its scope. This exclusion highlights the challenge the current MiCA framework faces in regulating decentralized entities. The exclusion implies that MiCA is primarily designed to address the risks associated with centralized actors in the crypto-asset space, leaving a regulatory gap for emerging decentralized systems. As the blockchain industry continues to evolve, it remains to be seen whether MiCA or future EU regulations will adapt to address the unique characteristics and risks associated with decentralized entities more effectively. "Fully Decentralized" The concept of "fully decentralized" services in the context of MiCA regulation is an important distinction when determining the applicability of the regulatory framework to various entities within the blockchain and crypto space. However, this term has yet to be universally accepted legal definition. One of the key characteristics of fully decentralized services is the absence of a central authority or intermediary, with decisions and operations being carried out autonomously by a network of participants. For instance, decentralized autonomous organizations (DAOs) may be considered fully decentralized if their governance structures and decision-making processes are based on collective input from token holders, without any single party having control or authority over the organization. Services like decentralized exchanges (DEXs) and lending platforms operate on smart contracts without intermediaries. Such platforms are governed by a decentralized network of participants, with no single party exercising control over the system. Legally speaking, "fully decentralized" may be interpreted as a system where no single entity or individual can be held accountable for the actions of the platform or service due to the distributed nature of decision-making and control. In the context of MiCA regulation, fully decentralized services are considered to be outside the scope of the regulation, as no identifiable issuer or intermediary is involved in providing the services. To determine whether a service is fully decentralized, regulators and legal experts may examine factors such as the extent of decentralization in decision-making processes, the role of token holders, and the level of human intervention or control over the platform's operations. Ultimately, the interpretation of "fully decentralized" will depend on each platform or service's specific circumstances and characteristics and may evolve as the industry and technology develop. DeFi: Decentralized Exchanges, Lending Systems, and Others Decentralized Finance (DeFi) has gained significant attention due to its benefits over traditional financial services. These services operate on a blockchain, leveraging smart contracts to automate transactions and remove intermediaries. Regulating DeFi presents unique challenges for legislators accustomed to traditional legal concepts and financial structures. The complexity, multifaceted nature, and rapidly evolving landscape of DeFi make it challenging to draft clear and compelling definitions and rules. One key challenge in regulating DeFi is the absence of clear distinctions between active stakeholders of Decentralized Autonomous Organizations (DAOs) and passive token holders with limited influence over the platform's operations. This lack of clarity complicates the regulatory process, as traditional regulations often depend on identifying specific actors and their roles within a system. Furthermore, DeFi's inherent decentralization and reliance on smart contracts make it resistant to centralized control, complicating enforcement efforts. As a result, regulators must adapt their approaches and consider novel regulatory frameworks to effectively address the unique characteristics of DeFi services and protect the interests of all stakeholders involved. * * * As the landscape of Web3 innovations continues to grow and diversify, it is evident that MiCA's current provisions may not adequately address these emerging technologies' complex and multifaceted nature. The legal implications surrounding the regulation of DeFi services and DAO governance highlight the need for adaptive and flexible regulatory approaches. In this ever-changing environment, it is critical for companies operating in the blockchain and crypto-asset space to stay informed about the evolving regulatory landscape and understand how MiCA may impact their businesses. Our team is dedicated to helping organizations navigate these complex regulations and ensure compliance with the full scope of MiCA obligations. Please get in touch with us for more details. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The Gatecoin liquidation case has drawn significant attention due to its implications for treating cryptocurrencies in insolvency proceedings. We will examine the court's approach to cryptocurrencies as property, trust issues related to cryptocurrencies and fiat currencies, and the unique BlueFire issue. Court's Recognition of Cryptocurrencies as Property In the Gatecoin liquidation case, the court addressed the contentious issue of whether cryptocurrencies qualify as property. The court recognized that cryptocurrencies have characteristics of property and held that they are capable of being held on trust. This decision aligns with an emerging global trend of treating digital assets as property in legal contexts, with potential ramifications for future cryptocurrency cases. Trust Analysis: Intention, Subject Matter, and Object The court applied the three certainties test to determine whether cryptocurrencies were held on trust for Gatecoin's customers: intention, subject matter, and object. The court found that the 2018 T&C governing the relationship between Gatecoin and its customers demonstrated no intention to create a trust. Despite the cryptocurrencies being identifiable and customers being ascertainable, the absence of intention prevented the establishment of a trust. Implications for Customers and Creditors The court's decision that cryptocurrencies were not held on trust for Gatecoin's customers has significant consequences for those customers and creditors. As a result of this finding, customers and creditors cannot assert proprietary claims over the cryptocurrencies held by Gatecoin. Instead, they will be treated as unsecured creditors in the liquidation process. This outcome highlights the importance of clearly establishing trust relationships in digital asset transactions and may influence the drafting of future contractual arrangements in the crypto industry. Court's Approach to Fiat Currencies In the Gatecoin liquidation case, the court also examined whether the fiat currencies held by Gatecoin were held on trust for its customers. The court applied the same trust analysis used for cryptocurrencies, focusing on the intention, subject matter, and object. It examined the relevant clauses in the 2018 T&C and other circumstances surrounding the relationship between Gatecoin and its customers. The court determined that the fiat currencies were not held on trust for Gatecoin's customers, similar to cryptocurrencies. The court reached this conclusion based on the lack of intention to create a trust in the 2018 T&C. The BlueFire Issue BlueFire, a market maker, played a significant role in the Gatecoin case. Gatecoin's largest account holder, BlueFire, did not trade in its own right but acted on behalf of Gatecoin. Gatecoin advanced credit lines to BlueFire for its trades, and BlueFire did not pay any account fees or charges like other customers. This unique relationship raised questions about the legal status of the currencies recorded in BlueFire's accounts. The BlueFire issue is significant because its resolution would impact the distribution of assets in Gatecoin's liquidation process and provide guidance on how similar arrangements between market makers and exchanges should be legally treated. The court found that the currencies recorded in BlueFire's accounts were assets of Gatecoin. The court's decision was based on the fact that BlueFire acted as an agent for Gatecoin and conducted transactions using funds provided by Gatecoin. The court also considered the Quistclose trust, which arises when funds are advanced for a specific purpose, and found that such a trust could apply to the fiat used to acquire cryptocurrencies on Gatecoin's behalf. This outcome demonstrates that the legal analysis applied to BlueFire's situation is different from that of the general customers, as the relationship between Gatecoin and BlueFire was distinct. Broader Implications The Gatecoin decision has significant implications for the cryptocurrency industry and future liquidation cases. The court has provided a legal basis for treating digital assets in insolvency and other legal proceedings by recognizing cryptocurrencies as property. This recognition is essential for the development and mainstream adoption of cryptocurrencies. Moreover, the court's analysis of trust issues highlights the importance of clearly defining the rights and obligations of parties in the crypto space. The decision serves as a reminder that the terms and conditions governing the relationship between exchanges and their customers can significantly impact the legal status of assets held on behalf of clients. The Gatecoin case also emphasizes the need for a thorough understanding of the legal implications of market-making arrangements. As the court treated BlueFire's situation differently from general customers, this decision guides future cases involving market makers and exchanges. The text of the decision you can read here. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

As part of the European Union's Markets in Crypto-Assets (MiCA) regulation, businesses dealing with crypto-assets must adhere to strict guidelines when drafting marketing communications. This article sheds light on the intricacies of MiCA's requirements for marketing communications, empowering businesses to navigate the regulatory landscape effectively. The Importance of Compliant Marketing Communications under MiCA Under the MiCA regulation, adhering to the requirements for marketing communications is vital for businesses issuing any of the three types of tokens classified by MiCA. Failing to comply with these regulations can impede the issuance and trading of crypto-assets, potentially limiting a business's growth and reach in the market. Article 4 of MiCA stipulates that for offers to the public of crypto-assets other than asset-referenced tokens or e-money tokens within the Union, businesses must draft their marketing communications in accordance with Article 7 and publish them per Article 9. Similarly, Article 5 demands compliance with Articles 7 and 9 when seeking admission to trading of such crypto-assets. For asset-referenced tokens, Article 29 lays down specific requirements for marketing communications related to public offerings or trading admissions. It necessitates that such communications conform to a set of predefined conditions to ensure transparency and fair representation of the crypto-assets. Likewise, marketing communications pertaining to e-money tokens are governed by similar rules that must be strictly followed to ensure regulatory compliance. The significance of adhering to these marketing communication requirements is evident in the fact that non-compliance can directly impact a business's ability to issue and trade crypto-assets in the European Union. Key Requirements for Marketing Communications Article 7 of the Markets in Crypto-Assets (MiCA) regulation outlines specific requirements for marketing communications related to the public offering or trading of crypto-assets, excluding asset-referenced tokens and e-money tokens. To help you navigate this regulation, we've broken down the key requirements: Identifiable as marketing communications: All marketing materials must be clearly identifiable as marketing communications to ensure transparency. Fair, clear, and not misleading: Information in marketing communications should be presented in a manner that is fair, clear, and not misleading to potential investors. Consistency with the crypto-asset white paper: The content of marketing communications must be consistent with the information provided in the crypto-asset white paper, where such a document is required by Article 4 or 5 of MiCA. Disclosure of white paper and contact information: Marketing communications should clearly state the availability of a crypto-asset white paper and provide the website address of the offeror, person seeking trading admission, or trading platform operator. Additionally, a telephone number and email address for contact should be included. Clear and prominent statement: Marketing communications must contain a clear and prominent statement indicating that no competent authority in the EU has reviewed or approved the marketing communication. The statement should also specify that the offeror, person seeking trading admission, or trading platform operator is solely responsible for the marketing communication content. No marketing communications before the publication of the white paper: If a crypto-asset white paper is required under Article 4 or 5, marketing communications cannot be disseminated before the white paper's publication. However, this does not affect the ability of the offeror, person seeking trading admission, or trading platform operator to conduct market soundings. Competent authority's power to assess compliance: The Member State's competent authority where marketing communications are disseminated holds the power to assess compliance with the requirements outlined in MiCA. "Fair, Clear, and Not Misleading" The "fair, clear, and not misleading" principle in marketing communications is crucial for maintaining transparency and trust with potential investors. While MiCA does not explain this principle, we can draw some insights from financial regulators. For instance, the UK Financial Conduct Authority (FCA) Handbook defines what "fair, clear, and not misleading" means. Although the FCA is a UK regulator not applicable to EU regulations, it can still serve as a helpful reference point. According to the FCA Handbook: Appropriate communication: Firms should communicate with their customers in an appropriate way, considering the means of communication, the information conveyed, and the nature of the customer and claim. Understanding of services: Firms should consider the average customer's understanding of the services provided. Logical presentation: Information should be presented in a logical order. Plain and intelligible language: Firms should use plain language and explain the meaning of such terms when jargon or technical terms are unavoidable. Prominence of key information: Key information should be prominent and easy to identify using headings, layout, display, and font attributes, as well as design devices such as tables, bullet points, and graphs. Avoiding unnecessary disclaimers: Firms should avoid using unnecessary disclaimers that may confuse or mislead customers. The European Securities and Markets Authority (ESMA) has published Guidelines on MiFID II product governance requirements, which include the "fair, clear, and not misleading" principle. The ESMA guidelines state that marketing communications should be accurate, balanced, and not disguise, diminish, or obscure important items, statements, or warnings. In addition, in Article 66, it is mentioned that: "Crypto-asset service providers shall not, deliberately or negligently, mislead a client in relation to the real or perceived advantages of any crypto-assets." Publication and Accessibility of Crypto-Asset White Papers and Marketing Communications Article 9 outlines the requirements for the publication and accessibility of crypto-asset white papers and marketing communications for crypto-assets other than asset-referenced tokens or e-money tokens. These requirements aim to maintain transparency and protect investors by making crucial information available. The main provisions of Article 9 are as follows: Publication on the website: Offerors and persons seeking admission to trading of crypto-assets must publish their crypto-asset white papers and, where applicable, marketing communications on their website. This website should be publicly accessible and provide the information at a reasonable time in advance of, and in any event before, the starting date of the offer to the public or the admission to trading of those crypto-assets. Availability: The published crypto-asset white papers and, where applicable, marketing communications must remain available on the website of the offerors or persons seeking admission to trading for as long as the public holds the crypto-assets. Consistency with notified versions: The published crypto-asset white papers and, where applicable, marketing communications should be identical to the version notified to the competent authority under Article 8, or, where applicable, to the version modified under Article 12. Modifications to Published Crypto-Asset White Papers and Marketing Communications Article 12 of MiCA addresses the modifications of published crypto-asset white papers and marketing communications for crypto-assets other than asset-referenced tokens or e-money tokens. The key provisions include: Reason for modification: Offerors, persons seeking admission to trading, or operators of a trading platform must modify their published crypto-asset white papers and marketing communications when there is a significant new factor, material mistake, or material inaccuracy capable of affecting the assessment of the crypto-assets. This requirement applies for the duration of the public offer or as long as the crypto-asset is admitted to trading. Notification to a competent authority: The modified crypto-asset white papers and marketing communications, along with the intended publication date and reasons for modification, must be notified to the competent authority of the home Member State at least seven working days before their publication. Public information: On the date of publication or earlier, if required by a competent authority, the offeror, the person seeking admission to trading, or the operator of the trading platform must immediately inform the public on its website of the notification of a modified crypto-asset white paper with the competent authority of its home Member State, providing a summary of the reasons for the modification. Consistency in a presentation: The order of information in the modified crypto-asset white papers and marketing communications must be consistent with that of the previously published documents. Notification to other authorities and ESMA: Within five working days of receipt of the modified documents, the competent authority of the home Member State must notify the modified documents to the competent authorities of the host Member States and communicate the notification and publication date to ESMA. ESMA will make the modified crypto-asset white paper available in the register upon publication. Publication on the website: Offerors, persons seeking admission to trading, or operators of trading platforms must publish the modified crypto-asset white papers and marketing communications, including the reasons for modification, on their website. Time-stamping and versioning: The modified documents must be time-stamped, and the most recent version must be marked as the applicable version. All modified documents should remain available for as long as the crypto-assets are held by the public. No extension of time limit: For utility tokens offering access to goods and services that do not yet exist or are not yet in operation, changes made in the modified documents shall not extend the 12-month time limit referred to in Article 4(6). Availability of older versions: Older versions of the crypto-asset white papers and marketing communications must remain publicly available on the website for at least 10 years after the date of publication, with a prominent warning stating that they are no longer valid and a hyperlink to the section where the most recent version is published. Marketing for Asset-Referenced Tokens Article 29 of MiCA establishes specific requirements for marketing communications associated with the public offering of an asset-referenced token or its admission to trading. Essential criteria for marketing communications: All marketing communications related to an asset-referenced token must meet the following requirements: (a) Be clearly identifiable as marketing communications; (b) Contain information that is fair, clear, and not misleading; (c) Present information consistent with the information found in the crypto-asset white paper; (d) Explicitly state that a crypto-asset white paper has been published, and clearly provide the issuer's website address, contact phone number, and email address. Right of redemption disclosure: Marketing communications must include an explicit and unambiguous statement informing token holders of their right to redeem the asset-referenced token against the issuer at any time. Publication of marketing communications: Issuers are required to publish marketing communications, along with any modifications, on their websites. Absence of prior approval requirements: Competent authorities shall not necessitate the prior approval of marketing communications before publication. Notification to competent authorities: Upon request, issuers must notify competent authorities of their marketing communications. Restrictions on marketing communications: No marketing communications should be disseminated before the publication of the crypto-asset white paper. However, this restriction does not hinder the issuer's ability to conduct market soundings. E-money Token Marketing Communications Article 53 of MiCA sets forth requirements for marketing communications related to the public offering of an e-money token or its admission to trading. Many of the provisions in this article are similar to those outlined in Article 29 for asset-referenced tokens. One significant difference between the requirements for asset-referenced tokens (Article 29) and e-money tokens (Article 53) is the specific disclosure regarding the right of redemption. For e-money tokens, marketing communications must include a clear and unambiguous statement informing token holders of their right to redeem the e-money token against the issuer at any time and at par value. Public Disclosure of Inside Information Timely and accurate disclosure: According to Article 88, issuers, offerors, and persons seeking admission to trading must promptly disclose inside information, which directly affects them. The disclosure should be made to allow the public to access, assess, and comprehend the information quickly, completely, and accurately. Separation from marketing: The disclosure of inside information must not be combined with marketing activities. This separation aims to prevent potential conflicts of interest and maintain the integrity of the disclosed information. Website publication and retention: Issuers, offerors, and persons seeking admission to trading must publish and maintain all disclosed inside information on their website for at least five years. * * * The new MiCA regulation represents a significant step towards creating a comprehensive legal framework for the crypto-asset industry in the European Union. While this regulation is crucial for fostering transparency, trust, and fair market practices, it can be challenging for businesses and individuals to navigate and understand its intricate provisions and requirements. We are well-equipped to help you analyze and comply with the MiCA regulation. Our team is dedicated to providing support, guidance, and tailored solutions to ensure your business operations align with the regulatory environment. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.

The Markets in Crypto-Assets Regulation (MiCA) represents a significant milestone in the European Union's regulatory landscape for digital assets. This analysis aims to provide an overview of the key provisions and requirements laid out by MiCA, specifically focusing on white papers for crypto-assets other than e-money tokens and asset-referenced tokens. By examining the scope of the application, the content requirements, and the regulatory authorities involved, this analysis seeks to offer valuable insights for stakeholders in the crypto-asset industry looking to navigate the MiCA framework. Definition of White Papers As defined under MiCA, white papers are comprehensive documents outlining essential information about a crypto-asset offering or an admission to trading on a trading platform. These documents aim to provide potential clients with a clear understanding of the project's objectives, the technology employed, the risks associated, and the rights conferred to the token holders, among other critical details. Scope: Tokens Other than E-Money and Asset-Referenced Tokens This analysis covers white papers on crypto-assets that do not fall under the e-money or asset-referenced tokens category. E-money tokens are digital representations of fiat currency that can be electronically stored and used as a medium of exchange. On the other hand, asset-referenced tokens are a class of crypto-assets that maintain a stable value by referring to a basket of assets, such as fiat currencies, commodities, or other crypto-assets. By focusing on white papers for tokens outside these categories, this analysis seeks to provide a comprehensive understanding of the regulatory framework established by MiCA for a broader range of crypto-assets. Offers to the Public of Crypto-Assets and Admission to Trading of Crypto-Assets A person cannot make an offer to the public and admission to trading a crypto-asset other than an asset-referenced token or e-money token in the Union unless they have: a) Drawn up a crypto-asset white paper. b) Notified the crypto-asset white paper to the competent authority. c) Published the crypto-asset white paper following Article 9 of MiCA. In cases where an offer to the public of a crypto-asset is exempt from the obligation to publish a crypto-asset white paper, but a white paper is voluntarily drawn up, the provisions of MiCA still apply. Main Content Requirements A crypto-asset white paper must contain the following information about: the offeror or the person seeking admission to trading, including their name, legal form, registered address, head office (if different), registration date, legal entity identifier, or another identifier required pursuant to applicable national law, and contact details; the issuer if different from the offeror or person seeking admission to trading; the trading platform operator in cases where it draws up the crypto-asset white paper; the crypto-asset project, including details about the offer, the crypto-asset, the rights and obligations attached to the crypto-asset, the underlying technology, the risks involved, and the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue the crypto-asset. The white paper must also contain: a clear and prominent statement on the first page of the white paper, stating that the offeror is solely responsible for the content of the crypto-asset white paper and that it has not been approved by any competent authority in any Member State of the European Union; a clear and unambiguous statement regarding potential risks associated with the crypto-asset, including the possibility of losing its value, transferability, liquidity, and coverage by investor compensation or deposit guarantee schemes; a statement from the management body of the offeror, a person seeking admission to trading, or the operator of the trading platform confirming that the white paper complies with MiCA and that the information presented is fair, clear, and not misleading; a summary of the crypto-asset white paper providing key information in brief and non-technical language; the date of the white paper's notification and a table of contents. Language Requirements The crypto-asset white paper must be drafted in an official language of the home Member State or a language customary in the sphere of international finance. Suppose the crypto-asset is also offered in another Member State. In that case, the white paper must be drafted in an official language of the host Member State or a language customary in the sphere of international finance. Additionally, the white paper must be made available in a machine-readable format. Publication Requirements Offerors and persons seeking admission to trading of crypto-assets other than asset-referenced tokens or e-money tokens must: a) Publish their crypto-asset white papers and, where applicable, their marketing communications, on their website, which should be publicly accessible. b) Make the white papers and marketing communications available on their website at a reasonable time in advance of, and in any event before, the starting date of the offer to the public of the crypto-assets or their admission to trading. c) Ensure the published crypto-asset white papers and, where applicable, the marketing communications, remain available on their website for as long as the public holds the crypto-assets. d) Ensure that the published crypto-asset white papers and, where applicable, the marketing communications, are identical to the version notified to the competent authority or, where applicable, to the version modified. Notification Process The approval process for crypto-asset white papers and marketing communications is as follows: a) Offerors, persons seeking admission to trading, or operators of trading platforms for crypto-assets other than asset-referenced tokens or e-money tokens must notify their crypto-asset white papers to the competent authority of their home Member State. b) Marketing communications, upon request, must be notified to the competent authority of the home Member State and the competent authority of the host Member State when addressing prospective holders of crypto-assets other than asset-referenced tokens or e-money tokens in those Member States. c) Competent authorities shall not require prior approval of crypto-asset white papers or any marketing communications relating to that before their respective publication. d) The notification of the crypto-asset white paper must be accompanied by an explanation of why the crypto-asset described in the white paper should not be considered a crypto-asset excluded from the scope of MiCA, an e-money token, or an asset-referenced token. No Additional Information Requirements The MiCA regulation specifies that offerors and persons seeking admission to trading of crypto-assets, other than asset-referenced tokens or e-money tokens, who have published a compliant crypto-asset white paper and, if applicable, an updated version, won't be subject to any further information requirements concerning the public offer of that crypto-asset or its admission to trading. This provision ensures that the regulatory framework remains streamlined, allowing offerors and persons seeking admission to trading to operate without encountering redundant or excessive requirements. Right of Withdrawal Under the MiCA regulation, clients can withdraw their acceptance of a crypto-asset offer within three business days without giving any reason or incurring any penalty. Offerors of crypto-assets must inform potential investors about this right in their crypto-asset white paper, ensuring they know their ability to reconsider their decision. Liability for Information in a Crypto-Asset White Paper If an offeror, a person seeking admission to trading, or an operator of a trading platform provides incomplete, unfair, unclear, or misleading information in a crypto-asset white paper or an updated version, they may be held liable for any loss incurred by a crypto-asset holder due to that infringement. Any contractual exclusion or limitation of this civil liability will not have any legal effect. Crypto-asset holders are responsible for providing evidence that the offeror, person seeking admission to trading, or trading platform operator has provided misleading or inaccurate information, influencing their decision to purchase, sell, or exchange the crypto-asset. However, the MiCA regulation states that offerors, persons seeking admission to trading, and trading platform operators will not be held liable for any loss incurred by a crypto-asset holder due to reliance on the information provided in a summary, as long as the summary isn't misleading, inaccurate, or inconsistent with other parts of the white paper, and it provides key information to help prospective holders make informed decisions about purchasing the crypto-asset. * * * In conclusion, the MiCA regulation establishes a comprehensive framework for the crypto-asset market, ensuring transparency, fairness, and investor protection. However, navigating the legal complexities and requirements can be challenging. Prokopiev Law Group is well-equipped to guide you through this regulatory landscape, providing expert advice and assistance in understanding and complying with the MiCA provisions. Our team is dedicated to helping you successfully navigate the world of crypto-assets while adhering to the highest legal standards. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.