European regulators publish guidelines on MiCAR’s classification of crypto-assets
The Markets in Crypto-Assets Regulation (MiCAR), which has been fully applicable since 30 December 2024, aims to provide a harmonised regulatory framework across Europe for issuers of crypto-assets and crypto-asset service providers.
Anyone who now wishes to offer certain crypto-assets or services, without the benefit of the transitional provision, must comply with the requirements of MiCAR. The application of MiCAR and the requirements it sets forth depend largely on the legal classification of the crypto-assets.
In December 2024, European Securities and Markets Authority (ESMA) and the European Supervisory Authorities (ESAs) published guidelines aimed to help with applying MiCAR’s rules on the classification of tokens:
- Joint guidelines of the ESA on templates for explanations and opinions, and the standardised test for the classification of crypto-assets (ESA 2024 28); and
- Guidelines of the ESMA on the conditions and criteria for the qualification of crypto-assets as financial instrument (ESMA75453128700-1323).
A basic overview of the classification of crypto-assets under MiCAR is provided by the flow chart in annex C of the ESA guidelines.
Crypto-assets under MiCAR
MiCAR only applies if the respective token qualifies as a crypto-asset under MiCAR. There are three cumulative requirements for the classification as a crypto-asset:
A crypto-asset is
- a digital representation of a value or of a right,
- that is able to be transferred and stored electronically,
- using distributed ledger technology or similar technology.
No exception from MiCAR
Another requirement is that none of the exemptions pursuant to article 2 sections 2-4 MiCAR apply.
Notably, MiCAR does, in particular, not apply to crypto-assets that qualify as financial instruments within the meaning of Directive 2014/65/EU – the Markets in Financial Instruments Directive II (MiFID II). The legal classification is always carried out on a case-by-case assessment based on the individual attributes of the crypto-assets.
The ESMA guidelines provide orientation, which, in addition to general guidance for legal classification, also explain the individual characteristics of financial instruments and their application to crypto-assets. ESMA also addresses questions regarding non-fungible tokens (NFTs) and hybrid tokens.
Classification of crypto-assets
It is crucial to determine the crypto-asset category under which a token may fall. MiCAR provides for three different types of tokens:
- E-money tokens (EMTs) are a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency.
- Asset-referenced tokens (ARTs) are a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination of these, including one or more official currencies.
- Utility tokens are crypto-assets that are only intended to provide access to a good or a service supplied by their issuer.
The most specific crypto-asset is the EMT. Only crypto-assets that do not qualify as EMTs can constitute ARTs. A token that is neither EMT nor ART – if it is solely intended to provide access to a good or service provided by its issuer – can be a utility token.
If the token does not meet this criterion either, but meets the general characteristics of a crypto-asset under MiCAR, it falls into the catch-all category of general crypto-assets. In this case, MiCAR still applies.
The flow chart in annex C of the ESA guidelines is very much focused on EMTs and ARTs: utility tokens are not mentioned at all. Further, there is no clarification that MiCAR can still apply to general crypto-assets that are neither of EMTs, ARTs or utility tokens.
Surprisingly, in the context of assessing MiCAR’s scope, the flow chart is limited to the sole statement that unique and NFTs do not fall under MiCAR, whereas the ESMA guidelines dedicate a whole chapter to this important question.
Explanation or opinion
Issuers of crypto-assets and ARTs must fulfil specific information or notification obligations.
They must include an explanation in the crypto-asset whitepaper, explaining why the crypto-asset
- is not exempt from MiCAR’s scope (in particular, not constituting a financial instrument under MiFID II);
- is not an ART; and
- is not an EMT.
Similar requirements apply to issuers of ARTs. However, they must submit a legal opinion to the national competent authority, stating that the ART
- is not exempt from MiCAR’s (in particular, not constituting a financial instrument under MiFID II); and
- is not an EMT.
The content and form of the explanation or legal opinion have been specified in the ESA guidelines accompanied by template documents.
Osborne Clarke comment
The guidelines have so far only been published in English and still need to be translated into the European official languages. They will then be applicable two months after the publication of the translations.
