In order to provide the European crypto market with more security and professionalism, the Markets in Crypto Assets Regulation (MiCAR) of the European Union will not only impose authorization and compliance obligations on crypto-asset service providers but will also focus on issuers and offerors of crypto-assets. Prior to public offerings as well as listings of of crypto assets on crypto trading platforms, it shall be required in the future that the responsible persons or companies prepare a white paper, which is required to have a legally prescribed minimum content, prior to the start of the offering or listing. In addition to increasing the transparency of Initial Coin Offerings (ICO) and other token sales, the MiCAR legislator expects this to also significantly strengthen the accountability of providers of new crypto assets, which has been lacking until now. The white paper provisions of MiCAR are strongly modeled after the mechanisms known from securities prospectus law.

What will Offerors of Crypto Assets be Required to Disclose in the White Paper?

Offerors of crypto assets will need to provide potential investors with sufficient information via the white papers to enable them to make the right investment decision for their needs. For this purpose, it is first of all necessary that they provide information about themselves in their capacity as offerors or responsible person for a listing or – if deviating from this – about the issuer of the crypto assets to be offered or listed. This includes information about their legal form, their contact details and the Management Body of the company and, in the case of listings, also about the operator of the trading platform. In addition, sufficient information must be provided on the crypto asset project upon which the offer is based, and details must be published on the type and procedure of the offer or listing. The white paper must also specifically state which rights and obligations are associated with the crypto assets and which technology is the basis of the crypto assets to be offered or listed. White papers must also provide information about the risks associated with the crypto assets. Finally, offerors must present disclosure in the white paper as to whether the consensus mechanism underlying the crypto assets has any environmental or climate impact. According to MiCAR, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) shall develop technical standards on the individual minimum requirements in the coming months in order to provide the market with specific guidance on what information must be provided in detail in white papers.

What Additional Requirements Do MiCAR White Paper Offerors Need to Fulfill?

In addition to the minimum content information, offerors of crypto assets will have to include an explicit statement in the white paper to be published that the white paper has not been approved or authorized by any authority and that the provider is solely responsible for the content of the white paper. This disclosure requirement derives from the liability regime provided under MiCAR for defective white papers. Offerors who fail to publish the information required under MiCAR in the white paper, or publish it incompletely or misleadingly, are liable to investors for compensation for any resulting damages. Although white papers do not have to be approved by authorities, they must be filed by the offeror with the competent authority in each member state in which the offer or listing will be available. MiCAR instructs that white papers are to be written in the language of the offeror’s home member state or in a language customary in the sphere of international finance.

Atty. Lutz Auffenberg, LL.M. (London)