More MiCAR details: Technical Advice on criteria for “significant” stablecoins

The EU’s incoming regime for cryptoassets includes tougher rules for "significant” stablecoins. Advice from the European Banking Authority now gives more clues about how some cryptoassets will be deemed "significant".

The EU Markets in Cryptoassets Regulation, known as MiCAR, sets obligations for issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs). It also allows for some ARTs and EMTs to be recognised as significant due to their size and certain other factors.

Issuers of significant ARTs and EMTs are subject to more stringent rules, including higher capital requirements. MiCAR also gives the European Banking Authority (EBA) powers to supervise these issuers once the regime starts to apply in June 2024.

MiCAR provides some criteria for determining whether an ART or EMT is significant but also tasks the European Commission with setting further criteria. In January 2023, the Commission published a Call for Advice to the EBA requesting technical advice both on this issue and on the type of supervisory fees to be charged by the EBA to the issuers of significant ARTs and significant EMTs. On 29 September 2023, the EBA published its response to the Commission’s Call for Advice.

Criteria for the classification of ARTs and EMTs as significant

The EBA recommends a series of core indicators and ancillary indicators to determine whether:

• ARTs and EMTs and their issuers can be considered as interconnected with the financial system, and
• the activities of the issuer of ARTs and EMTs are considered to be significant on an international scale, including the use of the ART/EMT for payments and remittances.

The EBA’s proposed core indicators would inform the ‘default’ assessment of significance against the relevant criterion, with the ancillary indicators having a role when the core indicators do not lead to a conclusive determination of significance. Importantly, this allows the EBA to take a holistic assessment of the indicators when determining whether an ART or EMT is significant, which gives the EBA more freedom to exercise its discretion in certain cases.

In addition, the EBA believes that there are gaps in reporting obligations for issuers of ARTs or EMTs under MiCAR which limits its ability to assess tokens. The EBA therefore suggests that additional reporting is required and will start work on guidelines in Q1 2024.

Supervisory fees

The EBA proposes criteria for allocating costs between issuers of significant ARTs and significant EMTs in relation to all costs incurred in connection with its supervisory tasks.

The EBA proposes charging both a minimum fee (to be specified) and an adaptable annual fee to be calculated according to the EBA’s estimated costs of supervising significant ARTs and significant EMTs. This annual fee is then attributed to issuers of significant ARTs / significant EMTs according to the size of their reserve / issuance respectively.

The EBA notes that flexibility will be needed to estimate the amount of fees from year-to-year in view of the fast-evolving market for cryptoassets, and the fact the number of tokens within its direct supervision, and supervisory priorities, may evolve substantially over time.