EBA publishes Final Report on draft RTS on the approval process for white papers for ARTs issued by credit institutions under MiCAR

RegCORE Client Alert | EU Digital Single Market

QuickTake 

On 7 May 2024, the European Banking Authority (EBA) published three sets of final draft regulatory technical standards (RTS) and one set of final draft implementing technical standards (ITS) relating to: (i) the authorisation as crypto-asset issuer (CAI) of asset-referenced tokens (ARTs), (ii) the information for the assessment of acquisition of qualifying holdings in issuers of ARTs and (iii) the procedure for the approval of white papers for ARTs issued by credit institutions under the EU’s Markets in Crypto-assets Regulation (MiCAR).Regulation (EU) 2023/1114.Show Footnote These technical standards are key to regulating access to the EU market by applicant crypto-asset issuers (CAIs) of ARTs and persons intending to exercise significant influence on these undertakings via the acquisition of qualifying holdings as well as in setting standards on the procedure for the approval of white papers for ARTs issued by credit institutions (i.e. banks). Each of the developments in points (i), (ii) and (iii) are assessed in dedicated Client Alerts, which should be read in conjunction with further analysis on MiCAR generally as well as specifically in context of further RTS/ITS as available from PwC Legal’s dedicated EU Regulatory Compliance Operations, Risk and Engagement (EU RegCORE) centre.

This specific Client Alert focuses on point (iii) above and the supervisory expectation in the EBA’s Final ReportAvailable here.Show Footnote on draft RTS detailing the approval process of white papers of ARTs issued by credit institutions pursuant to MiCAR. The draft RTS sets out the timeframes that credit institutions, competent authorities and the European Central Bank (ECB) or other central banks must follow during the procedure for the approval of a crypto-asset white paper. This RTS and other principles detailed in the Final Report were developed in close cooperation with the European Securities and Markets Authority (ESMA) and the ECB and are not only relevant for crypto-asset service providers (CASPs) but other financial services providers.

The Final Report marks an important milestone in delivering MiCAR’s full operationalisation by December 2024. Following a consultation period, the EBA has made some adjustments to the draft RTS. The changes include:

• An extension of the deadline for competent authorities to inform the issuer of a request of changes or, where applicable, the decision on the approval of the white paper;
• A clarification under which the competent authority’s requests of changes to the white paper shall be duly justified; and
• A clarification around the relevant provisions that the competent authority should consider for the substantive assessment of the white paper.

Key takeaways from the Final Report and draft RTS

The Final Report provides context on the rationale and objectives of the RTS and indicates supervisory expectations on how the rules in the RTS are to be applied. The draft RTS is annexed to the Final Report as a Commission Delegated Regulation. The draft RTS will be submitted to the European Commission for its endorsement. Following that, it will be subject to the scrutiny of the European Parliament and Council and then move to publication in the EU’s Official Journal and thus apply, as a Commission Delegated Regulation, in full across the EU. 

The draft RTS aims to harmonise the different steps and timeframes of the approval procedure for crypto-asset white papers for ARTs issued by credit institutions established in the EU, to ensure clear expectations and transparency for credit institutions seeking to issue ARTs. The draft RTS also clarifies expectations regarding cases where the timeline set in MiCAR for the issuance of an opinion by the ECB and other relevant central banks on risks related to the ART expires without an opinion having been submitted to the competent authority. 

The draft RTS sets out the following main elements of the approval procedure:

• The credit institution shall submit the crypto-asset white paper to the competent authority by electronic means and provide a contact point for the competent authority to submit all communications to it. 
• The competent authority shall acknowledge receipt of the application for approval of the crypto-asset white paper by electronic means no later than by close of business on the second working day following the receipt of the application. 
• The competent authority shall, within 20 working days of receipt of the application for approval of the crypto-asset white paper, assess the completeness of the crypto-asset white paper against the requirements referred to in Article 19(1) of MiCAR. 
• Where the competent authority concludes that the crypto-asset white paper is not complete, it shall inform the credit institution of the missing information and set a deadline by which the credit institution is required to provide the missing information, which shall not exceed 20 working days from the date of the request. 
• When the crypto-asset white paper is assessed as complete by the competent authority, it shall issue an acknowledgement of receipt of the complete crypto-asset white paper to the applicant and communicate the complete information received to the ECB and, where applicable, to a central bank, by electronic means no later than two working days from the acknowledgement of receipt. 
• Where the ECB and, where applicable, a central bank do not transmit an opinion to the relevant competent authority within the 20 working day’ period indicated in Article 17(5) of MiCAR, the relevant competent authority may consider this as an indication that there is no negative opinion on the grounds of a risk posed to the smooth operation of payment systems, monetary policy transmission, or monetary sovereignty. 
• Following a positive opinion by the ECB and, where applicable, a central bank, or following the expiration of the 20 working days’ period without any opinion issued by them, the competent authority shall undertake a substantive assessment of the crypto-asset white paper in accordance with Article 19 of MiCAR and may issue a duly justified request for changes of the crypto-asset white paper to the credit institution. 
• The deadline for providing the updated crypto-asset white paper requested by the competent authority shall not exceed 10 working days following the issuance of the request for changes by the competent authority. 
• The competent authority shall notify the credit institution of its final decision regarding the approval of the crypto-asset white paper by electronic means within 10 working days from the receipt of the new crypto-asset white paper or, where no changes to the crypto-asset white paper are requested, 10 working days from a positive opinion by the ECB and, where applicable, a central bank, or following the expiration of the 20 working days’ period without any opinion issued by them. 

The draft RTS also provides for the following additional aspects of the approval procedure:

• The suspension of the period for the assessment of completeness of the crypto-asset white paper, until the expiry of the deadline for providing any missing information requested by the competent authority. 
• The assumption that where an opinion by the ECB and, as applicable, other central banks is not delivered, or the deadline for its delivery has expired, the competent authority can consider that they have no objection to the offering to the public or admission to trading of the ART. 
• The publication of the approved crypto-asset white paper by the credit institution, without any changes or amendments, on its website and on a dedicated website established by the EBA.

The RTS also address some scenarios that are not explicitly covered by MiCAR, such as the possibility for the CA to request changes to the crypto-asset white paper following the substantive assessment, and the possibility for the CA to consider that no objection has been raised by the ECB or other relevant central banks if they do not transmit an opinion within the 20 working days’ period indicated in MiCAR.

The draft RTS is based on an impact assessment conducted by the EBA, which considered different policy options and their advantages and disadvantages. The draft RTS was subject to a public consultation between 20 October 2023 and 22 January 2024, and the EBA received six responses, which are summarised and addressed in the final report. The draft RTS will be submitted by 30 June 2024 to the European Commission for endorsement, following which they will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the EU. 

Key considerations for credit institutions

The draft RTS is an important piece of secondary legislation that complements and specifies the provisions of MiCAR regarding the approval of crypto-asset white papers for ARTs issued by credit institutions. The draft RTS aims to ensure a consistent and efficient application of the approval procedure across the EU, and to provide legal certainty and transparency for credit institutions and potential investors. The draft RTS also addresses some scenarios that are not explicitly covered by MiCAR, such as the possibility for the competent authority to request changes to the crypto-asset white paper following the substantive assessment, and the possibility for the competent authority to consider that no objection has been raised by the ECB or other relevant central banks if they do not transmit an opinion within the 20 working days’ period indicated in MiCAR. 

However, the draft RTS also raises some questions and challenges for credit institutions that intend to issue ARTs under MiCAR. For example:

• How will the competent authority assess the completeness and accuracy of the information provided in the crypto-asset white paper, especially regarding the methodology and mechanism for maintaining the stable value of the ART, the governance and risk management arrangements of the issuer, and the rights and obligations of the holders of the ART? 
• How will the competent authority coordinate and consult with the ECB and other central banks, and what criteria and evidence will they use to form their opinions on the potential impact of the ART on the smooth operation of payment systems, monetary policy transmission, or monetary sovereignty? 
• How will the competent authority deal with any potential conflicts or inconsistencies between the crypto-asset white paper and other regulatory disclosures or obligations that the credit institution may have under existing EU financial services legislation, such as the Capital Requirements Regulation, the Bank Recovery and Resolution Directive, or the Prospectus Regulation? 
• How will the credit institution ensure that the crypto-asset white paper remains up to date and reflects any changes or developments that may affect the ART, its issuer, or its holders, and what are the procedures and consequences for notifying and obtaining approval for any amendments to the crypto-asset white paper? 
• How will the credit institution comply with the ongoing reporting and monitoring requirements under MiCAR, such as the obligation to provide the competent authority and the EBA with quarterly reports on the ARTs, the obligation to notify the competent authority of any significant events or incidents that may affect the ARTs, and the obligation to cooperate with the competent authority and the EBA in case of any supervisory or enforcement actions? 

These are just some of the practical issues that credit institutions will need to consider and address when preparing and submitting their crypto-asset white papers for ARTs under MiCAR. The draft RTS provides some clarity and guidance on the approval procedure, but it also leaves room for interpretation and discretion by the competent authority, the ECB and other central banks, and the EBA. Therefore, credit institutions will need to seek legal and multidisciplinary advisory support for drafting and reviewing their crypto-asset white papers, and for engaging and communicating with the relevant authorities and stakeholders throughout the approval process.

Outlook

The draft RTS will contribute to the effective and consistent implementation of MiCAR, by enhancing the transparency and harmonisation of how white papers from credit institutions are issued. While much in the process will be familiar to seasoned financial services and digital asset native firms (as well as their advisors) when it comes to drafting offering documentation, the required granularity of detail and a MiCAR-specific administrative process for approving white papers, will warrant the need for dedicated legal and multidisciplinary advisory support for applications and notifications. 

It is also important to note that the requirements set out in MiCAR are supplemented by RTS/ITS beyond the issues analysed in this Client Alert. Consideration will need to be given to the breadth of other EU legislative and regulatory rulemaking instruments, as may apply directly or with MiCAR-modifications to issuers of ARTs, which are subject to specific supervisory expectations of each of the respective competent authorities involved in supervising the EU’s Single Market for crypto-assets. This includes a need to understand the differences and commonalities and thus best options to navigate the expectations of competent authorities both at the EU and accordingly at the respective Member State level. 

About us

PwC Legal is assisting a number of financial services firms, CAIs, CASPs along with other market participants in forward planning for changes stemming from relevant related developments. We maintain a multi-disciplinary and multijurisdictional team of sector experts to support clients navigate challenges and seize opportunities as well as to proactively engage with their market stakeholders and regulators for both their “build the business” and on-going “run the business” priorities. We couple our longstanding expertise in successful delivery of licensing applications, filing regulatory notifications and obtaining clearances as well as structuring, drafting and launching crypto-asset offerings, all with the help of a breadth of proprietary AI systems to streamline the preparation of applications and notifications as well as white papers to meet MiCAR and other EU as well as global standards. 

Moreover, we have developed a number of RegTech and SupTech tools for supervised firms, including PwC Legal’s Rule Scanner tool, backed by a trusted set of managed solutions from PwC Legal Business Solutions, allowing for horizon scanning and risk mapping of all legislative and regulatory developments as well as sanctions and fines from more than 1,500 legislative and regulatory policymakers and other industry voices in over 170 jurisdictions impacting financial services firms and their business.

Equally, in leveraging our Rule Scanner technology, we offer a further solution for clients to digitise financial services firms’ relevant internal policies and procedures, create a comprehensive documentation inventory with an established documentation hierarchy and embedded glossary that has version control over a defined backward plus forward looking timeline to be able to ensure changes in one policy are carried through over to other policy and procedure documents, critical path dependencies are mapped and legislative and regulatory developments are flagged where these may require actions to be taken in such policies and procedures.

If you would like to discuss any of the developments mentioned above, or how they may affect your business more generally, please contact any of our key contacts or PwC Legal’s RegCORE Team via de_regcore@pwc.com or our website.