The final version of MiCAR was adopted by the European Parliament on April 20, 2023. Compared to the supposedly final text version, which was leaked in October 2022, there were still considerable changes. The final text must now be formally approved by the Council of the European Union before it can ultimately be published in the official journal of the EU. MiCAR will then enter into force twenty days after publication. However, initially only provisions will have direct legal effect which are directed at ESMA, EBA and the ECB, requiring them to develop regulatory technical standards and guidelines. The provisions addressed to market participants will only gradually take legal effect. Titles III and IV of MiCAR, which set rules for asset-referenced tokens and for e-money tokens, will apply already twelve months after MiCAR is promulgated in the official journal of the EU. Providers that operate or want to implement business models with asset-referenced tokens or e-money tokens therefore have only one year to prepare for the new regulatory framework. Specifically affected are, among others, providers of stablecoins and crypto exchanges on which stablecoins can be traded.

Strong Need for Stablecoins in Professional Crypto Trading on the Markets

For professional crypto traders, the use of Stablecoins is associated with significant advantages. Stablecoins allow a quick and straightforward way to hedge against crypto asset price risks. For example, by investing in an e-money token pegged to the value of the euro or U.S. dollar, traders can secure value directly on a crypto exchange in the short term without having to exchange for it in fiat currency. Pooling of crypto investments can also be done without having to exchange into legal tender. However, according to MiCAR, e-money tokens will only be allowed to be publicly offered by a supervised credit institution or e-money institution in about a year. The trading authorization for e-money tokens on a crypto exchange may then also only be applied for by a credit institution, an e-money institution or a person appointed by such an institution. In this regard, under MiCAR, all crypto tokens meeting the definition of e-money tokens will generally be required to be treated as e-money within the meaning of the Second E-Money Directive (EMD2), regardless of whether the token fully meets the EMD2 definition of e-money.

What Should Be Considered When Issuing E-Money Tokens According to MiCAR?

E-money tokens may only be issued at face value against payment of the equivalent in fiat money under MiCAR. In addition, e-money issuers may not offer interest in connection with e-money tokens. E-money token bearers must be entitled to a re-exchange right against the e-money token issuer at any time. If they make use of their re-exchange right, the e-money token issuer may not charge a fee for the re-exchange. Money can be earned from the issuance of e-money tokens to the extent that e-money issuers may invest a maximum of 70% of the funds received in exchange for e-money tokens in secure, low-risk and liquid financial instruments. In contrast, at least 30% must be held in segregated bank accounts. In any case, issuers of e-money tokens must inform the supervisory authority responsible for them – i.e. BaFin in Germany – 40 days in advance of the public offering or the application for admission to trading. Furthermore, issuers must prepare and publish a MiCAR whitepaper prior to the launch of their e-money tokens and make it available to BaFin. BaFin aaproval is not required. Nevertheless, the content requirements for the MiCAR whitepaper must be strictly adhered to, as issuers of e-money tokens will be liable to token holders without fault in the event of a non-published or incorrect whitepaper.

Attorney Lutz Auffenberg, LL.M. (London)