Draft RTS on requirements, templates and procedures for handling complaints under MiCAR

General Information

This document is the final report dated March 13, 2024, produced by the European Banking Authority (EBA). It presents the draft regulatory technical standards (RTS) aiming to specify the requirements, templates, and procedures for handling complaints under Article 31 of Regulation (EU) 2023/1114 on crypto-asset markets (MiCAR). The scope covers issuers of asset-referenced tokens (IART) and, where applicable, third parties involved in the partial or total distribution of these tokens. The document contains 42 pages and falls within the European regulatory framework applicable from June 30, 2024 for ART.

Executive Summary

The MiCAR regulation, which entered into force on June 29, 2023, establishes a harmonized framework for crypto-asset markets in the European Union, aiming to regulate asset-referenced tokens (ART) and protect holders while ensuring market integrity (p. 4). Article 31 of MiCAR mandates the EBA, in cooperation with ESMA, to develop regulatory technical standards (RTS) on complaint handling procedures for holders of ART and other interested parties, including consumer associations. These RTS define effective, transparent, fair, and swift procedures to manage complaints, covering complaint policy and function, information to complainants, complaint templates, accepted languages, investigation procedures, communication of results, as well as specific provisions for complaints involving third parties (p. 4, 11-17). A public consultation conducted from July 12 to October 12, 2023 led to targeted amendments to clarify certain points and further align the EBA RTS with those of ESMA, notably on language requirements, provision of a copy of the complaint in case of electronic submission, and the addition of a section on the legal representative in the complaint template. Provisions related to personal data protection were also strengthened following recommendations from the European Data Protection Supervisor (EDPS) (p. 4, 8-10, 28-32). These standards will be submitted to the European Commission before June 30, 2024, then reviewed by the European Parliament and the Council before official publication. Their implementation aims to ensure uniform consumer protection in the crypto-asset sector, facilitate regulatory supervision, and reduce compliance costs for the actors concerned.

Context and Objectives

The document responds to the mandate of Article 31 of MiCAR, which requires issuers of asset-referenced tokens (IART) to establish effective and transparent procedures for the rapid, fair, and consistent handling of complaints from holders and interested parties, including consumer associations (p. 5). The European regulatory context aims to fill existing gaps in consumer protection and supervision of crypto-asset markets, which were not covered by previous financial legislation (p. 5-6). The EBA relies on the common guidelines (Joint Committee Guidelines) of the European Supervisory Authorities (ESAs) adopted in 2013/14 to harmonize complaint management procedures in banking, insurance, and investment sectors, which have proven effective and relevant during a 2021 evaluation (p. 6-7). The objective is to extend this harmonization to IART, while integrating the specificities of the MiCAR mandate and ensuring consistency with the RTS being developed by ESMA for crypto-asset service providers (CASPs) (p. 7-10). The document thus aims to guarantee high consumer protection, market integrity, and financial stability in the European crypto-asset sector.

Summary of Key Points by Theme

Harmonization of complaint handling procedures:

- The draft RTS relies almost entirely on the common ESAs guidelines (JC Guidelines) to ensure consistency with the banking, insurance, and investment sectors, thereby reducing compliance costs and facilitating supervision (p. 6-7, 25-26).

- Where MiCAR imposes additional requirements, the text aligns with the RTS under development by ESMA for CASPs to ensure cross-sector consistency (p. 7-10).

Specific RTS requirements:

- Complaint policy and function: IART must define a complaint management policy approved by senior management and a dedicated function ensuring fair treatment and conflict of interest management (p. 13).

- Information to holders and interested parties: IART must provide clear, up-to-date, and free information on complaint procedures, including eligibility conditions, submission methods, indicative deadlines, and possible recourse (p. 14).

- Templates and recording: a harmonized complaint template is imposed, accessible in paper and electronic formats, with an obligation to acknowledge receipt and provide a copy in case of electronic submission. Complaints must be recorded in a secure electronic register (p. 14-15).

- Languages: procedures and templates must be published in the languages used for marketing or communication with holders, as well as in the official languages of the relevant Member States, allowing complainants to submit their complaints in these languages (p. 8-9, 15).

- Investigation procedure: complaints must be assessed promptly to verify clarity and completeness, with requests for additional information if necessary. Inadmissible complaints must be clearly justified. The issuer must regularly inform the complainant of progress and communicate the final decision in clear language, including available remedies (p. 15-17).

- Handling complaints involving third parties: IART must coordinate with third-party distributors to ensure effective transfer and handling of complaints, these third parties being subject to the same requirements (p. 17).

Personal data protection:

- In accordance with EDPS recommendations, the RTS explicitly incorporate GDPR application, with the obligation for IART and third parties to publish a privacy notice accompanying the complaint template (p. 9-10, 15, 17).

Public consultation and adjustments:

- The consultation received 8 responses, including 7 public. Feedback confirmed the balance of the approach, the need for greater harmonization with ESMA RTS, the free nature of procedures, and led to targeted adjustments notably on languages, provision of copies of electronic complaints, and the legal representative section in the template (p. 27-32).

Cost-benefit analysis:

- Additional costs for issuers are limited and related to the setup and maintenance of complaint management procedures and functions.

- Benefits for consumers include increased confidence through a uniform and transparent procedure.

- National authorities benefit from simplified supervision via a single framework (p. 24-27).

Main Findings and Lessons Learned

Established facts:

- MiCAR imposes a harmonized framework for crypto-asset markets, with specific requirements for complaints from ART holders (p. 4-6).

- The proposed RTS largely adopt the JC Guidelines, recognized as effective and appropriate since 2013/14, validated by a 2021 report (p. 6-7).

- The public consultation confirmed general acceptance of the approach and the need for harmonization with ESMA RTS (p. 27-32).

- Requirements include written procedures, a dedicated function, harmonized templates, language obligations, reasonable deadlines, and personal data protection (p. 13-17).

Assumptions:

- Harmonization of procedures will reduce compliance costs and improve consumer protection.

- Alignment with ESMA RTS will avoid harmful regulatory divergences for actors operating both as IART and CASP (p. 7-10, 27-32).

Interpretations:

- The EBA considers that complaint management requirements are not specific to crypto-assets but must fit within a global financial framework to ensure consistency and effectiveness (p. 6-7).

- The implementation of extended language requirements is justified by the cross-border nature of crypto-assets and technological advances in automatic translation (p. 8-9).

Uncertainties:

- The exact operational impact on IART, especially smaller ones, remains to be measured, although additional costs are estimated as limited (p. 26-27).

- Uniform application of national deadlines in a cross-border context could pose practical challenges (p. 40-41).

Conclusions and Author's Recommendations

The EBA concludes that the chosen approach, based on the near full adoption of the JC Guidelines complemented by targeted alignment with ESMA RTS, effectively meets the MiCAR mandate regarding complaint management for IART (p. 7-10, 27-32). The changes made following the public consultation enhance clarity, consistency, and consumer protection, notably through the addition of language requirements, provision of copies of electronic complaints, and consideration of personal data protection in accordance with GDPR (p. 8-10, 28-32). The EBA recommends the swift validation and adoption of these RTS by the European Commission before June 30, 2024, to ensure their entry into force concomitant with the application of MiCAR provisions relating to ART (p. 4). The implementation of these standards will improve consumer confidence, facilitate regulatory supervision, and ensure uniform complaint handling across the European crypto-asset market.