This final report presents the regulatory technical standards regarding the use of asset-referenced tokens (ARTs) and e-money tokens (EMTs) in a non-EU currency as a means of exchange, in accordance with the MiCAR regulation. It outlines the reporting requirements for issuers of ARTs and EMTs, including the estimation of the number and value of daily transactions. The report also includes changes made in response…
- Title: Final Report on RTS on use of ARTs and EMTs as a means of exchange under MiCAR
- Author: European Banking Authority (EBA)
- Date: 19 June 2024
- Type: regulatory standard (draft Regulatory Technical Standards - RTS)
- Scope: methodology to estimate the number and value of transactions associated with the use of asset-referenced tokens (ARTs) and e-money tokens (EMTs) denominated in non-EU currency as a means of exchange, under MiCAR (Regulation (EU) 2023/1114)
- Target population: issuers of ARTs and EMTs denominated in non-EU currency, crypto-asset service providers (CASPs)
- Sector: crypto-asset markets in the European Union
- Period: MiCAR entry into force on 30 June 2024 for ARTs and EMTs (Titles III and IV)
- 49-page document, summary based on the first 36 pages provided
The document presents the draft Regulatory Technical Standards (RTS) developed by the EBA, in cooperation with the ECB, to specify the quarterly estimation methodology of the average number and aggregated average value of transactions per day associated with the use of ARTs and EMTs denominated in non-EU currency as a means of exchange within a single currency area, pursuant to Articles 22(6) and 58(3) of MiCAR (p. 4).
This reporting obligation aims to enable competent authorities to monitor risks linked to the widespread use of these tokens, notably monetary substitution effects that could impact monetary policy and monetary sovereignty in the EU (p. 5).
Following a 3-month public consultation (November 2023–February 2024) with 9 responses, the EBA incorporated several significant changes:
- Clarification of the scope of transactions to report, limiting estimates to transactions effectively used as a means of exchange for payment of goods and services, excluding investment transactions (collateral, derivative contracts, exchanges with issuer or CASP unless settlement of crypto-asset transactions) (p. 7-9).
- Geographic scope restricted to transactions where payer and beneficiary are located in the same single currency area within the EU, excluding cross-border transactions between different currency areas (p. 9-11).
- Simplification of the data reconciliation process transmitted by CASPs to issuers, notably by aggregating data by currency area and assigning reporting responsibility according to transaction type (between custodial and non-custodial wallets) (p. 11-13).
- Maintenance of the exclusion of transactions between non-custodial wallets from the reporting scope under Article 22(1)(d), due to lack of reliable information on these transactions (p. 4, 26-27).
The RTS also specify the modalities for calculating transaction values, taking into account the underlying asset baskets of the tokens and applicable exchange rates (p. 19-20).
Next steps include submission of the RTS to the European Commission for approval, followed by review by the European Parliament and Council before official publication (p. 4).
In conclusion, these RTS aim to harmonize the reporting methodology to ensure comparability and reliability of data, essential for supervising risks related to the use of ARTs and EMTs denominated in non-EU currencies within the EU.
- MiCAR (Regulation (EU) 2023/1114) regulates crypto-asset markets in the EU, including ARTs and EMTs, with partial entry into force on 30 June 2024 for ARTs and EMTs (p. 5).
- Objectives: ensure market integrity, financial stability, holder protection, and limit risks to monetary policy and monetary sovereignty linked to widespread use of ARTs and EMTs (p. 5).
- Article 22(1)(d) requires ART issuers to report quarterly estimates of the average number and average value of transactions per day associated with token use as a means of exchange within a single currency area (p. 5).
- Article 22(6) mandates the EBA to define the precise methodology for calculating these estimates, in cooperation with the ECB (p. 5).
- Article 58(3) extends these obligations to EMTs denominated in non-EU currency (p. 5).
- Issue: absence of an established methodology to calculate these estimates, difficulty accessing data notably geographic and on transaction nature (p. 21).
- RTS objective: clarify methodology to ensure harmonized, comparable, and reliable data to enable risk monitoring related to these tokens (p. 21).
- Limits: exclusion of transactions between non-custodial wallets from the reporting scope under Article 22(1)(d), and recognition of difficulties in precisely determining transaction purpose (p. 4, 26-27).
1. Definition and scope of transactions to report:
- Transactions to include are those where the ART or EMT is used as a means of exchange for payment of goods and services, excluding investment transactions such as exchanges with issuer or CASP, use as collateral, or settlement of derivative contracts (p. 7-9, 28-30).
- Transactions between non-custodial wallets are excluded from the reporting scope under Article 22(1)(d) due to lack of reliable information, but must be reported under Article 22(1)(c) (p. 4, 23-24, 26-27).
- Transfers between addresses belonging to the same person are not considered transactions (p. 15-16, 29).
2. Geographic scope:
- Reporting covers only transactions where payer and beneficiary are located in the same single currency area within the EU (p. 9-11, 35-36).
- This limitation aims to comply with the wording "within a single currency area" of MiCAR and to focus supervision on risks to monetary policy and monetary sovereignty in each area (p. 9-11).
3. Calculation methodology:
- The issuer must estimate the average number and aggregated average value of transactions per day per quarter, excluding excluded transactions (exchanges with issuer/CASP, collateral, derivatives, other uses not related to payment for goods/services) (p. 18-19).
- Transaction value is calculated according to the official currency of the issuer’s country of establishment, considering exchange rates and components of the underlying asset basket (p. 19-20).
- Transactions may be settled on-chain or off-chain, between custodial wallets and between custodial and non-custodial wallets (p. 15-16, 18-19).
4. Data reconciliation and reporting by CASPs:
- To avoid double counting and simplify reconciliation, data transmitted to the issuer are aggregated by currency area (p. 11-13, 23).
- The beneficiary’s CASP reports aggregated data for transactions between custodial wallets and from non-custodial to custodial wallets.
- The payer’s CASP reports aggregated data for transactions from custodial to non-custodial wallets, on a best efforts basis (p. 11-13).
5. Special cases and clarifications:
- Transactions involving crypto-assets other than ART, used to pay for goods and services but settled in ART, must be included (p. 8-9, 32-34).
- Crypto-asset exchange transactions between two parties using ART only as settlement means, without payment purpose, are excluded (p. 8-9, 32-34).
- Risks of data manipulation (wash trading) must be reported to competent authorities, but suspicious transactions should not be automatically excluded from reporting (p. 31-32).
6. Key definitions:
- Single currency area: countries sharing the same official currency (p. 18).
- Custodial wallet: wallet controlled by a CASP (p. 18).
- Non-custodial wallet: wallet controlled by the user (p. 18).
- Findings:
- MiCAR requires quarterly reporting of transaction estimates associated with the use of ARTs and EMTs as a means of exchange within a single currency area (p. 4-5).
- The EBA conducted a public consultation with 9 responses, identifying about 20 major issues (p. 4, 26-27).
- The finalized RTS specify methodology, transaction scope, geographic scope, and data reconciliation modalities (p. 4, 14-20).
- Assumptions:
- Transactions between non-custodial wallets cannot be reliably reported and are excluded from the scope of Article 22(1)(d) (p. 4, 23-24).
- Aggregated data by currency area allow better reliability and reduced reporting costs (p. 11-13, 23).
- Interpretations:
- Geographic limitation to intra-single currency area transactions responds to a strict interpretation of MiCAR and objectives of protecting monetary sovereignty (p. 9-11).
- Exclusion of investment uses aims to focus reporting on actual means of exchange uses (p. 7-9).
- Uncertainties:
- Difficulties in determining transaction purpose with certainty (payment vs investment); estimates are on a "best estimate" basis (p. 7-9).
- Possible evolution of use cases, notably for crypto-asset transactions settled in ART (p. 8-9).
- Potential future development of reporting on cross-border transactions between different currency areas under another regulatory framework (p. 10-11).
- The EBA recommends a harmonized methodology for calculating quarterly estimates of the number and value of transactions associated with the use of ARTs and EMTs as a means of exchange, in accordance with MiCAR (p. 4, 14-20).
- The scope of transactions to report must exclude investment uses, exchanges with issuer or CASP, transactions between non-custodial wallets, and internal transfers within the same person (p. 7-9, 15-16).
- Reporting must be limited to transactions where payer and beneficiary are located in the same single currency area within the EU (p. 9-11, 35-36).
- Data reconciliation must be simplified by aggregated reporting by CASP and by currency area, with differentiated responsibilities according to transaction type (p. 11-13).
- The EBA maintains exclusion of transactions between non-custodial wallets from the scope of Article 22(1)(d), while ensuring reporting under other articles (p. 4, 26-27).
- These RTS will be submitted to the European Commission for approval, then to Parliament and Council before official publication (p. 4).
- The EBA emphasizes that these measures will enable better supervision of risks related to the use of ARTs and EMTs denominated in non-EU currencies, notably regarding financial stability and monetary policy.
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