Final Report on RTS on colleges under MiCAR

General Information

This document is the final report of the European Banking Authority (EBA) published in June 2024. It presents the draft Regulatory Technical Standards (RTS) relating to the supervisory colleges provided for in Article 119(8) of the European MiCAR regulation (EU 2023/1114) on crypto-asset markets. The scope covers the technical rules for the composition, operation, and identification criteria of members of supervisory colleges for significant token issuers of asset-referenced tokens (ART) and e-money tokens (EMT). The document is based on a public consultation conducted between November 2023 and February 2024, and concerns the application period of MiCAR from December 2024 (p. 1-7).

Executive Summary

The report deals with the EBA's development of draft RTS to frame the supervisory colleges of significant token issuers under MiCAR. These colleges, which the EBA must establish, manage, and chair, aim to facilitate supervision and cooperation among competent authorities. The RTS define:

- the criteria to identify the "most relevant entities" among custodians, trading platforms, payment service providers, and crypto-asset service providers involved in significant ART and EMT;

- the conditions to consider an ART or EMT as "widely used" in a Member State, notably a threshold of at least 20% of the population holding it or a transaction volume exceeding 1.25 million per day and 250 million euros in value;

- the practical modalities of the colleges' operation, including participation, voting procedures, secure information exchange, and possible task delegation.

The public consultation received majority support, despite concerns about the availability of necessary data, which is outside the RTS scope. The EBA maintained the drafts almost unchanged, specifying notably the possibility to delegate the chairmanship to the prudential authority for EMTs issued by credit institutions. These RTS will be submitted to the European Commission for approval and then to the European Parliament and the Council (p. 4-7).

Context and Objectives

MiCAR, which came into force in June 2023, regulates crypto-assets in the EU, with progressive application from December 2024. The EBA is responsible for supervising significant token issuers (ART and EMT) and must establish supervisory colleges for these entities. Article 119(8) of MiCAR requires the EBA to define by RTS the criteria to identify the "most relevant entities" to be included in these colleges, the conditions for wide-scale use of tokens, and the practical rules for the colleges' operation. The objective is to ensure harmonized and transparent application of rules, avoid divergences between authorities, and guarantee a balance between adequate representation and operational efficiency. The public consultation gathered opinions on these proposals. The RTS must be submitted to the Commission before the end of June 2024 (p. 5-7, 18-19).

Summary of Key Points by Theme

Definition of the most relevant entities:

- For custodians (crypto-asset service providers, credit institutions, investment firms), the top three are selected based on the value of asset reserves or funds received in exchange for EMT over a six-month reference period.

- For trading platforms, the top three are selected based on the average number of transactions per day and the aggregated transaction value.

- For payment service providers (PSP), criteria are similar: average number and aggregated value of payment transactions related to EMT.

- For CASPs providing custody and administration of crypto-assets, criteria are the average number and value of daily transactions.

Wide-scale use of a token:

- An ART or EMT is considered widely used in a Member State if at least 20% of the population holds this token, or if the average daily number of transactions exceeds 1.25 million with an aggregated value of at least 250 million euros.

- The location of holders is defined by habitual residence for natural persons and registered office for legal persons.

Operation of the colleges:

- A written agreement must define practical modalities, including composition, meeting frequency (at least annually), participation, voting procedures (quorum of half the voting members, simple majority), secure information exchange, and the possibility to invite other authorities without voting rights.

- The EBA may delegate the chairmanship to the competent prudential authority for EMTs issued by credit institutions.

- Members must designate representatives and alternates, and exchange documents in a timely manner.

Public consultation:

- Three responses received, generally favorable.

- Concerns about data availability to apply the criteria, but data collection falls under other regulatory obligations.

- The EBA maintained the proposals with some editorial clarifications.

Impact analysis:

- Costs are mainly borne by the EBA, minimal, with benefits related to clarity, coherence, and supervision efficiency (p. 9-16, 18-26).

Main Findings and Lessons Learned

Established facts:

- MiCAR requires the creation of supervisory colleges for significant token issuers.

- The RTS define objective criteria to identify the most relevant entities and conditions for wide-scale use.

- The public consultation confirmed general acceptance of the proposed criteria.

Assumptions:

- Data necessary to apply the criteria will be available through other regulatory obligations, notably ITS under MiCAR.

- The composition of the colleges will be reassessed at least every two years.

Interpretations:

- The approach based on the top three entities according to quantitative indicators is preferred over fixed thresholds to ensure flexibility and relevance.

- Wide-scale use is better defined by absolute thresholds rather than relative ones, to avoid complexity and guarantee uniform application.

Uncertainties:

- Availability and quality of data for some criteria may vary.

- Operational efficiency of the colleges will depend on proper implementation of rules and cooperation among authorities.

(p. 4-7, 9-16, 18-26)

Conclusions and Recommendations

The EBA concludes that the proposed RTS drafts provide a clear, harmonized, and balanced framework for the composition and operation of supervisory colleges under MiCAR. These RTS ensure adequate representation of competent authorities while guaranteeing the operational efficiency of the colleges. The EBA recommends maintaining criteria based on quantitative indicators to identify the most relevant entities, and absolute thresholds to define wide-scale token use. It highlights the possibility to delegate the chairmanship of colleges for EMTs issued by credit institutions to the competent prudential authority, to leverage supervisory synergies. The RTS will be submitted to the European Commission for approval, then to Parliament and Council, before official publication. No substantial changes were made following the public consultation, except editorial clarifications (p. 4-7, 23-27).