The final report presents guidelines on recovery plans for issuers of asset-referenced tokens and e-money tokens, in accordance with the MiCAR regulation. These guidelines specify the format and content of recovery plans, which must include recovery plan indicators and recovery options tailored to each issuer's risk profile. Issuers must also ensure that their plans avoid inconsistencies with other existing…
This document is the final report of the guidelines on recovery plans under Articles 46 and 55 of Regulation (EU) 2023/1114, known as MiCAR, published by the European Banking Authority (EBA) in June 2024. It concerns issuers of asset-referenced tokens (ARTs) and electronic money tokens (EMTs) in the European Union. The scope covers the regulation of recovery plans aimed at restoring compliance with asset reserve requirements, applicable to all issuers, significant or not, during the post-entry into force period of the regulation. The document contains 40 pages.
The MiCAR regulation establishes a comprehensive approach for the regulation of crypto-assets in the EU, requiring ART and EMT issuers to develop and maintain a recovery plan intended to restore compliance with asset reserve requirements in case of failure. These guidelines specify the format and content of these plans, which must include four elements: a summary of key points, governance information, a description of applicable recovery options, and a communication and disclosure plan. Recovery indicators, both quantitative and qualitative, must be calibrated according to the issuer's risk profile and operational environment, mandatorily including a de-pegging risk indicator to monitor the alignment between the token price and the value of the referenced asset. Alert thresholds trigger a rapid internal escalation process and notification to the supervisor within a maximum of 24 hours. Recovery options must include at least one measure to strengthen capital position and one to improve liquidity. Recovery scenarios must be varied and test the capacity to face different shocks, financial or non-financial. Finally, the guidelines provide for coordination between multiple plans, notably in cases of multiple issuers for the same token or issuers subject to other regulatory frameworks such as the BRRD. These prescriptions aim to harmonize practices, strengthen issuers' preparedness and resilience against risks, while ensuring token holders' protection and market stability (p. 3-6).
Articles 46 and 55 of the MiCAR regulation require ART and EMT issuers to have a recovery plan to restore compliance with asset reserve requirements in case of failure. However, the regulation does not detail the content or structure of these plans, which could lead to heterogeneity in issuers' practices and complicate competent authorities' oversight. The EBA was therefore mandated to define guidelines specifying the format and information to be included in these plans. The objective is to ensure adequate issuer preparedness against adverse scenarios, improve supervision, and harmonize practices within the EU. The guidelines build on existing experience with recovery plans for credit institutions, adapted to the specificities of crypto-asset issuers. They set high-level principles, notably on recovery indicators, recovery options, governance, and communication, while considering the proportionality principle according to issuers' size, complexity, and risk profile (p. 4-6).
- Format and content of the recovery plan: The plan must include a summary of key elements, detailed governance information (roles, processes, escalation procedures), a description of recovery options (with scenario analysis, preparatory measures, service preservation), and a communication and disclosure plan (p. 14-22).
- Governance and recovery indicators: Issuers must define a recovery indicator framework adapted to their profile and that of the token, including at minimum categories such as liquidity risk, operational risk, credit risk, indicators related to referenced assets (notably de-pegging risk), and solvency indicators. For significant issuers, additional indicators on market risk, concentration, and market confidence are required. Thresholds must be calibrated to trigger increased monitoring or plan activation, with regular monitoring and updates according to risk evolution (p. 16-18, Annex I).
- Recovery options: The plan must include a range of options adapted to the business model, comprising at least one measure to strengthen capital and one to improve liquidity. Options provided by MiCAR (redemption limitations, liquidity fees) must be framed to avoid abusive use. Each option must undergo a feasibility assessment, including risks, operational constraints, external dependencies, financial and strategic impacts, and a communication plan. Varied scenarios (systemic, idiosyncratic, non-financial shocks) must test the plan's robustness (p. 19-22, Annexes II and III).
- Communication and disclosure: The plan must provide how to inform internal and external stakeholders, manage potential negative market reactions, and ensure continuity of token-related services. Communication must be adapted to different audiences and recovery phases (p. 21-22).
- Proportionality: The application of requirements must be adapted according to issuers' size, complexity, nature, business model, token classification (significant or not), and risk profile. Significant issuers must apply stricter requirements, including annual plan updates and inclusion of all indicator categories (p. 13-14).
- Coordination between plans: In cases of multi-issuer issuance of the same token or multiple tokens by the same issuer, plans must be coordinated to align indicators, thresholds, options, activation, and execution to ensure fair treatment of holders. Issuers subject to other frameworks (BRRD) may integrate required information in a single plan under conditions (p. 23).
- Implementation and obligations: The guidelines apply from 13 November 2024. Authorities must notify their compliance to the EBA before this date. Plans must be clear, complete, regularly updated, and communicated to authorities (p. 9-12).
- Impact and consultation: The impact analysis highlights that these guidelines clarify expectations without significantly increasing issuers' burden, while improving supervision and transparency for token holders. Public consultation confirmed general support, with adjustments on communication modalities and indicator flexibility (p. 29-40).
- Findings: The MiCAR regulation imposes recovery plan obligations for all ART and EMT issuers. The guidelines specify a harmonized framework, with minimum requirements on structure, indicators, options, and communication. The application of the proportionality principle is central to adapt requirements to issuers' profiles. Coordination between multiple plans is necessary to ensure effectiveness and fairness. The implementation deadline is set for 13 November 2024 (p. 3-14, 23).
- Assumptions: The indicators proposed in Annex I are illustrative and must be adapted by issuers according to their own risk analysis. Threshold calibration relies on issuers' capacity to anticipate events leading to non-compliance. Plan activation is not automatic upon threshold breach but requires a decision based on a circumstantial analysis.
- Interpretations: The flexibility given to issuers in choosing indicators and options aims to reconcile harmonization and adaptation to specificities. Proactive communication is essential to manage reputational risks and maintain holders' confidence. Possible integration with BRRD plans aims to avoid redundancies for concerned entities.
- Uncertainties: Limited experience in this domain for ART and EMT issuers implies that the guidelines rely on high-level principles, likely to evolve with practice and authorities' feedback. Managing relationships with third parties operating the asset reserve poses challenges in coordination and information timing.
The EBA recommends ART and EMT issuers comply with the guidelines by developing clear, complete recovery plans adapted to their profile, integrating a calibrated recovery indicator framework, a range of recovery options including at least one capital strengthening and one liquidity improvement measure, as well as a structured communication plan. Issuers must ensure regular plan updates, at least annually for significant issuers, and promptly notify competent authorities of changes. In cases of multi-issuer or multi-token issuance, close coordination is necessary to guarantee consistency and fairness. Authorities must integrate these guidelines into their supervisory practices and notify their compliance to the EBA before 13 November 2024. The EBA emphasizes the importance of open dialogue between issuers and authorities to adapt plans to market and risk evolutions. These measures aim to strengthen issuers' resilience, protect token holders, and ensure the stability of the crypto-asset market in the EU (p. 62, 63-68, 29-40).
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