The Draft Regulatory Technical Standards (“RTS”) for adjusting own funds requirements, focus on issuers of significant asset-referenced tokens (“ARTs”) and e-money tokens, introduced by the Markets in Crypto-Assets Regulation (“MiCA”). Issuers of ARTs must be authorised in the EU, which includes submitting a detailed application and meeting specific compliance obligations. These issuers must maintain own funds that are at least the highest of three thresholds: €350,000, 2% of the average value of reserve assets (as described in Article 36), or a quarter of their fixed overhead from the previous year.
However, for significant ART issuers, this requirement increases to 3% of the average reserve assets, reflecting their greater potential impact on the financial system. An exemption to this is for credit institutions that issue asset-referenced or e-money tokens. These institutions are not subject to the 3% own funds requirement since they are already regulated under separate, stringent financial regulations.
The RTS outlines the procedure for adjusting own funds when an ART issuer becomes classified as significant. Once an issuer’s tokens are classified as significant, either by meeting the criteria in Article 43 of MiCA or by voluntary request as per Article 44 of MiCA, the European Banking Authority (“EBA”)must notify the issuer within 25 working days. The issuer is then required to submit a plan detailing how they will increase their own funds to 3% of the average reserve assets, including specific steps and timelines for compliance, also within 25 days. The authority will monitor the issuer’s progress, and if the measures do not proceed as expected, alternative actions may be taken. The overall timeframe for adjusting the funds must not exceed 6 months.
The EBA has conducted a cost-benefit analysis and impact assessment to evaluate the implications of these standards. The main concern addressed by the RTS is the risk posed by significant ART issuers to monetary policy, sovereignty, and financial stability. Harmonised rules across European Union (“EU”) Member States are critical to ensure consistent regulatory standards and avoid discrepancies that could undermine financial stability.
In drafting the RTS, the EBA has adopted a principle-based approach by combining a rule-based approach that would enforce a strict procedure for adjusting its own funds, and a principle-based approach offering more flexibility to competent authorities in setting timeframes. It ensures both a clear procedural framework and the necessary flexibility to accommodate the unique circumstances of each issuer.
The EBA held a public consultation on the draft RTS, feedback from the consultation highlighted concerns about potential cliff effects for issuers transitioning to significant status and the potential negative impacts of imposing business restrictions during the adjustment period. Respondents emphasised the importance of a flexible approach to timeframes, noting that overly strict procedures could disrupt business operations and financial stability.
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