1. Council Regulation, 2023/1114, 2023 O.J. (L. 150) (hereinafter MiCA).
2. Id. pmbl. ¶ 1, 2, and 4.
3. Id. pmbl. ¶ 22.
4. Cf. Dirk Zetzsche et al., Regulating Libra, 4 OXFORD J. LEGAL STUD. 80, 98 (2021).
5. Cf. MiCA, supra note 1, art. 2(3)(4). The exemption does not extend to NFTs issued as a series where the market price of one token determines the value of another. See DIRK ZETZSCHE ET AL., REMAINING REGULATORY CHALLENGES IN DIGITAL FINANCE AND CRYPTO-ASSETS AFTER MICA (2023), a publication for the Committee on Economic and Monetary Affairs (ECON), Policy Department for Economic, Scientific and Quality of Life Policies, of the European Parliament.
6. Cf. Zetzsche et al., The Markets in Crypto-Assets Regulation (MiCA) and the EU Digital Finance Strategy, 16 CAP. MARKETS L. J. 203, 210 (2021).
7. Cf. SEC v. Howey Co., 328 U.S. 293, 301 (1946) (defining an investment contract as “an investment of money in a common enterprise with profits to come solely from the efforts of others”). For a comparison with EU law, cf. Phillipp Hacker & Chris Thomale, Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies Under EU Financial Law, 15 EUR. COMP. & FIN. L. REV. 645 (2018).
8. Cf. EUR. SEC. AND MARKETS AUTH., ADVICE ON INITIAL COIN OFFERINGS AND CRYPTOASSETS 19–21, Annex 1 (2019).
9. Cf. Zetzsche et al. supra note 6, at 208f.
10. Cf. Zetzsche et al., Digital Assets, MiCA and EU Investment Fund Law, at 30, (Univ. New S. Wales L., Working Paper No. 23–27, 2023).
11. MiCA, supra note 1, art. 60.
12. Id. art. 3(6).
13. Cf. Zetzsche et al., supra note 4, at 85.
14. MiCA, supra note 1, art. 3(7).
15. Id. pmbl. ¶ 22 (hereinafter “Recital 22”).
16. Id.
17. MiCA Title IV deems EMT’s to be e-money under of Council Directive 2009/110, 2009 O.J. (L 267) 7 (EC) (hereinafter ‘EMD’), and thus the rules of EMD Title II and Title III apply, subject to additional product requirements set out in EMD Title IV. MiCA, supra note 1, tit. IV. The EMD, in turn, refers to Council Directive 2007/64, 2007 O.J. (L 319) 1 (EC) (hereinafter ‘PSD I’), which has been repealed by Directive Council Directive 2015/2366, 2015 O.J. (L 337) 35 (EC) (hereinafter ‘PSD II’). This multi-referencing makes MiCA Title IV difficult to handle.
18. Cf. MiCA, supra note 1, art. 17 and tit. IV.
19. Id. art. 48(1).
20. Cf. id. art. 19 and Annex II (describing all the information and “disclosure items” that must be included in a “crypto-asset white paper for an asset-references token,” or ART); cf. id. art. 51 and Annex III (describing all the information and “disclosure items” that must be included in a “crypto-asset white paper for an e-money token,” or EMT).
21. See D.A. ZETZSCHE & C.D. PREINER, ELTIFR VERSUS AIFMD Ch. 5 (D.A. Zetzsche ed., Kluwer 2020).
22. Cf. MiCA, supra note 1, art. 17(1) (outlining the requirements for a credit institution to offer an asset-referenced token [ART] to the public); cf. id. tit. IV (“Requirements to be fulfilled by all issuers of e-money tokens [EMTs].”).
23. Id. art. 18(2) (“Legal persons… that intend to offer to the public… [an ART] shall submit [an] application” containing all the information in Art. 18, para. 2).
24. Id. In particular, relating to ARTs, see the application requirements in art. 18, para. 2, subsections (d) (“programme of operations”), (f) (“issuer’s governance arrangements”), (g) (“cooperation arrangements with specific crypto-asset service providers”), (h) (“the identity of the members of the management body of the applicant issuer”), (i) (“proof that the [management body has] sufficiently good repute… “), (j) (“proof that any shareholder… [of the] issuer is of sufficiently good repute”), (m) (“a description of the contractual arrangements with the third-party entities”), and (q) (“a description of the applicant issuer’s complaints-handling procedures”). The application requirements of Article 18 often refer to Articles 31 through 35 for further guidance. Id. art. 18. Relating to EMTs, see id. art. 48(3) (“Requirements for the offer to the public or admission to trading of e-money tokens”) in conjunction with id. art. 3(1) (“Definitions”) and id. arts. 5(a)–(i) (“Admission to trading of crypto-assets other than assetreferenced tokens or e-money tokens” [PSD1 (EMT)]).
25. Cf. id. art. 25 (“Modification of published crypto-asset white papers for asset-referenced token”); cf. id. art. 51 (“Any significant new factor, any material mistake or any material inaccuracy… shall be described in a modified crypto-asset white paper”).
26. Id. art. 33 (“Notification of changes to management body”); id. arts. 48(3), 3(1), and 14(5)(i) (PSD1 (EMT)).
28. Cf. id., tit. III(4) (“Acquisitions of issuers of asset-referenced tokens”); id. at 48(3) and art. 3(3) (EMD).
29. Cf. id. tit. VII(3) (“Administrative penalties and other administrative measures by competent authorities”).
30. Cf. id. Annex II (ART) and III (EMT).
31. Id. arts. 28 (ART) and 51(13) (EMT).
32. Cf. id. arts. 26 (ART) and 51 (EMT).
33. Id. arts. 26(1) and 52(1).
34. Id. arts. 26(2) and 52(2).
35. DIRK ZETZSCHE & JANNIK WOXHOLTH, THE EU LAW ON CRYPTOASSETS (CUP 2025).
36. Id.
37. Id.
38. MiCA, supra note 1, arts. 29(1) (ART) and 53(1) (EMT).
39. Id. arts. 29(2) (ART) and 53(2) (EMT). The statutory redemption rights are mandated by Art. 39 and Art. 49. Id. arts. 39 and 49. The statutory redemption rights must also be disclosed in the White Paper. Id. arts. 19(6) and 51(6).
52. Title III, Ch. 6 MiCA (ART) and Art. 55 MiCA (EMT).
53. The statutory redemption rights are mandated by arts. 39 and 49. Id. arts. 39 and 49. The statutory redemption rights must also be disclosed in the White Paper. Id. arts. 19(6) and 51(6).
54. See Nick Baker, USDC Stablecoin Depegs, Crypto Market Goes Haywire After Silicon Valley Bank Collapses, COINDESK, (Mar. 11, 2023), https://www.coindesk.com/markets/2023/03/11/usdc-stablecoin-and-crypto-market-go-haywire-after-silicon-valley-bank-collapses/ [https://perma.cc/F6HA-4M5Q]; see also ZETZSCHE, supra note 5, at 31–32 (on de-pegging of US stablecoins when reserve banks got into financial difficulties).
55. See MiCA, supra note 1, Cf. Title III, Ch. 6 MiCA (ART) and Art. 55 MiCA (EMT).
56. Id. art. 34.
57. Id. arts. 39 and 49.
58. Id.
59. Id. arts. 35 and 55.
60. Id. art. 3(14). MiCA defines funds by reference to Art. 4, point (25) of Directive (EU) 2015/2366 (PSD II). This definition includes cash, cash substitutes and e-money, and excludes crypto-currencies and other crypto-assets. This means that a stable coin handing out tokens in return for Bitcoin does not fall under this provision.
61. Cf. id. arts. 19(6) and 51(6).
62. Id. art. 39(2).
63. Id. art. 39(1).
64. Id. arts. 49(2) and (4).
65. For EMTs, see id. arts. 36(6), and 48(3). For Significant EMTs, see id. arts. 7 (EMD), 58(1), and 36.
66. Cf. id. arts. 36(4), 58(1), and 48(3).
67. Id. art. 36(1). For Significant EMTs, see id. art. 58(1). Pursuant to Art. 49(4) of MiCA, EMT holders may redeem their tokens by asking the issuer “at any time and at par value, [to pay] in funds, other than electronic money, the monetary value of the e-money token held to the holder of the e-money token.”
68. Significant EMTs are defined by Art. 56 (1), referring to Art. 43 (1) MiCA (definition of Significant ARTs) as those that fulfil at least three of the criteria listed in Art. 43 (1) MiCA. These criteria shall be subject to specification by way of delegated acts. The criteria are notably: the number of token holders exceed 10 million; the value, market capitalisation or size of the reserve of assets is higher than EUR 5 billion; the average number and average aggregate value of transactions in the ARTs/EMTs per day is higher than 2.5 million transactions and EUR 500 million; the issuer of the ART/EMT is a provider of core platform services designated as a gatekeeper under Regulation (EU) 2022/1925; the issuer has significant activities on an international scale; the token or issuer is interconnected with the financial system; and the issuer issues at least one additional ART or EMT and provides at least one crypto-asset service.
69. Id. arts. 36 (2), (5), and 37 (2). For Significant EMTs, id. art. 58(1).
73. Cf. id. arts. 36(11) and (12). For Significant EMTs, id., art. 58(1). The pricing must be based on good data, follow recognized valuation procedures and set the price on the conservative end of the spectrum. Where data quality is poor, valuation shall aim at an accurate estimate of the intrinsic value of the reserve assets. For details, see arts. 2 (8), (9) of Regulation (EU) 2017/1131 on money market funds.
74. MiCA, supra note 1, arts. 36(6) and (7). For Significant EMTs, id. art. 58(1).
75. Id. arts. 36(8) and 58(1).
76. See id. art 58(9).
77. Id. arts. 36(9), (10), and 58(1) (modifying the first point in time that this requirement applies).
78. Id.
79. Id. art. 37. For Significant EMTs, id. art. 58(1); see also id. arts. 48(3), 54, and 7(1) EMD. While the methods of safeguarding for e-money are specified in the law of the Member States (Art. 7 (5) EMD), custody is one accepted method of safeguarding.
80. Id. arts. 37(2)–(5). For Significant EMTs, id. art. 58(1). For EMTs, id. arts. 48(3) and 7.
81. See id., arts. 37 (6)–(8). For Significant EMTs, id., art. 58(1). For EMTs, id. at arts. 48(3) and 7 (EMD).
82. Cf. id., arts. 37(9) and 31. For Significant EMTs, id., art. 58(1). For EMTs, id. arts. 48(3) and 7 (EMD).
83. Cf. id. art. 37(10). For Significant EMTs, id., art. 58(1). For EMTs, id. arts. 48(3) and 7 (EMD).
84. See id. art. 37.
85. Cf. id. art. 22 et seq. UCITSD; art. 21 AIFMD. For details, see Hooghiemstra in Zetzsche, AIFMD, 3rd. (2020), Ch. 16.
86. Cf. id. art. 38 (ART) and for Significant EMTs, art. 58 (1) MiCA. For Significant ARTs, art. 45(3) MiCA requires reserve assets to have “a resilient liquidity profile that enables issuers of significant assetreferenced tokens to continue operating normally, including under scenarios of liquidity stress.”
87. See id.
88. See id.
89. See id.
90. See id.
91. Cf. id. art. 54 (EMT) (requiring that at least 30% of the funds received are deposited in separate accounts in credit institutions, while “the remaining funds must be invested in secure, low-risk assets that qualify as highly liquid financial instruments with minimal market risk, credit risk and concentration risk, in accordance with Article 38(1) of this Regulation, and are denominated in the same official currency as the one referenced by the e-money token.”).
92. Cf. id. arts. 40 (ART) and 50 (EMT). On EMTs, see also ZETSCHE & WOXHOLTH, supra note 35.
93. Where under national law the NCA is different from the respective resolution and prudential supervisory authorities, these authorities are to be informed in parallel. In case of a redemption plan, the authority in charge of resolutions may make recommendations in regard to the plan.
94. Often credit institutions that are already licensed issue ARTs or EMTs. While Article 46 of MiCA on ARTs does not relate to this case, Article 55 of MiCA on EMTs does by specifying the initial date of a public offering or trading as point of reference. We hold that the same date must be the reference date in this case where an already licensed institution offers ARTs.
95. MiCA, supra note 1, tit. III(5) and art. 55 (EMT).
96. Id. art. 85(1) (EMT).
97. Id. art. 46(1) (ART); id. art. 55(1) (EMT).
98. Id. art. 46(3) (ART); id. art. 55(1) (EMT).
99. See William A. Birdthistle, Breaking Bucks in Money Market Funds (2010), WIS. L. REV., 1155, pp. 1168f, 1177f (2010) (discussing runs on money-market funds).
105. MiCA, supra note 1, art. 16(3)–(4) (ART). The European Passport for issuers of EMTs follows from Art. 48 (3) of MiCA in conjunction with Art. 3 (1) E-money Directive, referring to the passporting rules of Articles 17, 25 of the first Payment Services Directive (PSD 1).
109. See MiCA, supra note 1 at pmbl. ¶ 22 (“where crypto-assets have no identifiable issuer, they should not fall within the scope of Title II, III or IV of [MiCA]”).
110. Cf. Zetzsche et al., Distributed Liability of Distributed Ledgers, 2018 ILL. L. REV. 1361, 1391, 1400f (Oct. 20 2018); see Aleksandar Gilbert, Governance Tokens Might Come With Legal Liability, US Judge Says - bZx DAO and Founders Were Sued After $55M Hack, THE DEFIANT (Mar. 30 2023) https://thedefiant.io/gov-tokens-legal-risk [https://perma.cc/NSE5-VGHS].
111. See MiCA, supra note 1, art. 66; cf. infra at IV.
112. See Linn Anker-Sørensen & Dirk A. Zetzsche, From Centralized to Decentralized Finance: The Issue of ‘Fake-DeFi (Dec. 22, 2022) http://dx.doi.org/10.2139/ssrn.3978815 [https://perma.cc/2CK2-9VR2]; Mitchell Goldberg & Fabian Schär, Metaverse Governance: An Empirical Analysis of Voting Within Decentralized Autonomous Organizations, J. OF BUS. RSCH. (2023) https://www.sciencedirect.com/science/article/pii/S0148296323001224 [https://perma.cc/MP9Q-938R].
113. See Regulation (EU) 2023/114, of the European Parliament and of the Council of 31 May 2023 On Markets in Crypto-assets, and Amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937, 2023 O.J (L150) Art. 3 (16)(b)(c)(d) (MiCA on operation of a trading platform for crypto-assets; exchange of crypto-assets for funds; exchange of crypto-assets for other crypto-assets).
114. See MiCA supra note 1, art. (3)(15) (MiCA on execution of orders for crypto-assets on behalf of clients; placing of crypto-assets).
115. Id.
116. Cf. Zetzsche, supra note 4, at 91–97. We have argued supra, Part II, that some of these services may qualify as AIF.
117. Zetzsche et al., EP Study, supra note 5, at 52–56.
118. Id.
119. Id. at 63 et seq.
120. These include crypto-assets offered for free; rewards for validation, utility tokens and tokens in limited networks of merchants.
121. Recital 22 clarifies that CASPs must comply with Title V of MiCA even though Titles II, III, and IV of MiCA do not apply. We welcome this clarification as, with regard to CASPs, it renders unnecessary the difficult decision as to what constitutes partially decentralized applications in contrast to fully decentralized applications. This means that for tokens issued by decentralized, partially decentralized, and fully decentralized applications, the CASP rules apply if a crypto-asset service is provided.
123. See Dirk Zetzsche, Julia Sinnig, & Areti Nikolakopoulou, Crypto Custody, 19 CAP. MARKETS L. J. 207, 216–17 (Jul. 2024) https://doi.org/10.1093/cmlj/kmae010 [https://perma.cc/3YU6-LQKP].
124. Cf. MiCA, supra note 1, art. 60(5) for UCITS and AIFMs with regard to order transmission and reception, portfolio management and advice.
125. Information to be submitted include, inter alia, a programme of operations setting out the types of crypto-asset services that the applicant crypto-asset service provider intends to provide, a description of their internal control mechanisms, and risk assessment frameworks.
126. Art. 60 (9) of MiCA as written is not very helpful in practice: the respective information will in most cases differ, at least in details, simply to address the new legislative framework provided under MiCA, if only in terms of terminology. Further, most submissions to date take place by way of e-documents, so submission of a few pages more or less does not matter. We thus recommend submitting the full documents describing, for instance, the organization, resources and expertise to the NCAs, but markup the new parts, instead of avoiding resubmission altogether.
127. See MiCA, supra note 1, art. 60(8).
128. E.g., art. 24 MiFID; Art. 12 (1) AIFMD.
129. Douglas W. Arner et al., The Financialisation of Crypto: Designing an International Regulatory Consensus, 53 COMPUT. L. & SEC. REV. 1–2 (2024).
130. E.g., Art. 30 bis 32 of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 Supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.
131. Arner, supra note 129, at 3–10.
132. Anker-Sørensen & Zetzsche, supra note 112.
133. This broad understanding is in line with an envisaged expansion of the outsourcing rules under AIFMD II. Cf. on AIFMD II; see Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds, COM/2021/721 final.
134. See generally Woxholth et al., Competing Claims to Crypto-assets, 28:2 UNIF. L. REV. 226 (2023).
135. See MiCA, supra note 1, art. 70(1).
136. Under most insolvency laws, only persons and entities can become insolvent, and it is uncertain whether DeFi applications qualify as one of the former.
137. Cf. Woxholth et al., supra note 134 at 8. For an argument that streamlining of crypto insolvency laws is a priority, cf. Zetzsche et al., supra note 5, at 118.
138. See Arner, supra note 129, at 3–10.
139. Cf. Zetzsche et al., supra note 5, at 47.
140. Supra Part II.3.
141. Cf. AUTORITÉ DES MARCHÉS FINANCIERS, THE REUSE OF ASSETS: REGULATORY AND ECONOMIC ISSUES 18 (2016).
142. The MiFD frameworks on the safeguarding of client funds is scattered around a number of provisions, including Art. 16(8), (9) and (10) of MiFD as well as Art. 49 and Annex I of Com. Del. Reg. 2017/565.
143. Cf. MiCA, supra note 1, art. 59(2). Where already licensed financial intermediaries provide crypto-asset services pursuant to Art. 60 MiCA, the authorization requirements of the CRD, MiFID, UCITSD, AIFMD and other pieces of legislation also require that the registered seat and headquarter is located within the EEA.
144. MiCA, supra note 1, art. 75(1). Unlike Art. 21(2) AIFMD, Art. 75(1) of MiCA does not require this agreement to be written.
145. Id. art. 75(1)(a)–(g).
146. Id. art. 75(3).
147. See Zetzsche et al., supra note 5, at 33 et seq (providing overview of incidents).
148. MiCA, supra note 1, art. 75(2), (4). An equivalent monitoring of an AIF’s cashflows and assets held in custody, with the objective of ensuring investor protection, is foreseen by Art. 21 (7) and (8) AIFMD.
149. MiCA, supra note 1, art. 75(5).
150. Id. art. 75(6).
151. Id. art. 75(7). An equivalent asset segregation and registration of an AIF’s assets is foreseen by Art. 21 (8) (a) (ii) AIFMD.
152. MiCA, supra note 1, art. 75(4).
153. See id.
154. See id.
155. Id. art. 75(8). The equivalent provision under AIFMD is Art. 21(12) AIFMD.
156. Id.
157. Cf. Dirk Zetzsche & Areti Nikolapolou, Crypto Custody in Insolvency—An Empirical View, in CHRISTIAN KOLLER & MATTHIAS LEHMANN, DIGITAL ASSETS IN ENFORCEMENT AND INSOLVENCY: SECURING CREDITOR ACCESS AND PROTECTING CUSTOMER INTERESTS IN THE CRYPTO WORLD (forthcoming Feb. 2025).
158. See Julia Sinnig & Dirk A. Zetzsche, Traditional and Digital Limits of Collective Investment Schemes, 21 EUROPEAN COMPANY AND FINANCIAL LAW REVIEW 157, 181–88 (2024) https://doi.org/10.1515/ecfr-2024-0007 [https://perma.cc/U3G8-MV9A].
