Dr Jane Nweike
Introduction
Latest Updates: MiCAR
What are the latest RTSs and ITSs for MiCAR? Well, on July 12, 2023, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published for public consultation Regulatory Technical Standards (RTSs) and Implementing Technical Standards (ITSs), with respect to various activities regulated under the Markets in Crypto Assets Regulation (MiCAR).
The EBA’s consultation paper covers RTSs and ITSs for applications for authorisation in respect to offers to the public or admission to trading of asset-referenced tokens (ARTs). Importantly, this applies only to issuers of ARTs. ESMA’s consultation paper, however, applies to crypto-assets service providers (CASPs), such as crypto-exchanges, custodial service providers, etc.
Furthermore, we give a summary below of each consultation paper and some points as to what this means for ART issuers and CASPs.
Summary of the EBA’s Consultation Paper
The EBA’s proposed Regulatory Technical Standards (RTSs) and Implementing Technical Standards (ITSs) & MiCAR
The RTSs set out the information which an applicant for authorisation to issue ART to the public will need to provide to the competent authority, in addition to a white paper. The ITS provides the templates and standard forms to be used when applying. Small issuances which never exceed EUR5,000,000 or equivalent in another currency are exempt from this requirement.
Under the RTSs, the information required to provide in the application include:
- Information about the issuer’s identity. Such as its legal name, a legal form, details of its contact person and professional advisers, constitutional documents, etc.
- Programme of operations. The issuer’s white-paper setting out its business model. Together with strategy and risk assessments, description of the ART/EMT, description of group structure, and business plan setting out its financial forecast and initial viability and sustainability of the issuance.
- Information about internal governance arrangements and structural organisation. The issuer’s management body and their terms of reference, an organisation staff showing the forecasted human resources required, whistleblowing policy, code of conduct, conflicts of interest policy, market abuse policy, and procedures showing how it will comply with its disclosure obligations.
- Information on internal control framework. Descriptions of risk management systems and controls (particularly ICT risk management), internal audit function, business continuity plan, description of the DLT on which the ART is issued, and if any CASPs are to be used, details of the CASP’s internal control mechanisms, particularly as it relates to ML/FT risks.
- Liquidity management, reserve assets and redemption rights. Information on the composition, management and segregation of the reserve assets, the custody and investment of the reserve assets, including contractual arrangements with any third parties in this regard.
- Identity and proof of good repute, sufficient knowledge, skills, experience and time of the management body. The personal identification information of each member of the management body, criminal records, pending civil or criminal proceedings involving any member, estimated number of hours monthly and yearly to be devoted to the issuer.
- Information relating to shareholders or members with qualifying holdings. Information on the sufficient good repute of each shareholder with a qualifying holding, as well as information on the number and value of the shares held by each such shareholder, and any encumbrances on such shares.
Summary of the ESMA’s Consultation Paper
The ESMA’s proposed Regulatory Technical Standards (RTSs) and Implementing Technical Standards (ITSs) & MiCAR
The areas covered by the RTS and ITS are:
- Content of the notification to be provided by certain financial institutions that intend to also provide crypto-asset services. Under the MiCAR, certain financial institutions already licensed to carry out their operations may also provide crypto-asset services without obtaining another authorisation. Such financial institutions will however need to notify their national competent authority of their intention to provide crypto-asset services. The RTSs require such notifications to contain information on the financial institution’s program of operations, business continuity, ML/FT prevention, segregation of clients’ assets, custody and administration and ICT risk management, among other things. The ITSs provide a template for providing this information.
- Content of an application for authorisation to provide crypto-asset services by an unregulated person. An intending CASP which is not already regulated as a financial institution is required under the MiCAR to be authorised by its national competent authority. The RTSs set out the information to be provided in such applications. This includes general information about the applicant and their programme of operations. In addition, applicants should include prudential requirements, business continuity, internal governance arrangements, ML/FT detection and prevention, among others. Furthermore, the ITSs provide the standard form to be used by applicants.
The areas covered by the RTS and ITS are:
- Requirements, templates and procedures for handling complaints by CASPs. The RTSs require a CASP to have a complaints-handling procedure. This should contain: the criteria for admissibility of complaints, a statement that complaints are filed free of charge, a detailed description of how to file the complaints, the process for handling complaints, the timeline for handling a complaint and the arrangements for keeping records of complaints filed and the measures taken to resolve them. The complaints handling procedure is to be endorsed by the CASP’s management body and published on its website in all languages in which it communicates with clients. Moreover, the ITSs provide a template for submitting complaints, which may be submitted by electronic means or by post.
- Requirements for CASPs policies and procedures on conflicts of interests. The RTSs set out considerations to be made by CASPs when identifying the types of interests that may arise in the course of its business and persons with conflicting interest. Additionally, the RTSs require CASPs to have a written conflict of interests policy. This should contain: policies and procedures to prevent exchange of information among connected persons, policies and procedures for the prompt communication of conflicts of interest to management, and the CASP’s remuneration policy, among other elements,.
- Assessments of acquisition of a qualifying holding. The RTSs stipulate the information to be provided to a national competent authority by a potential acquirer of qualifying direct or indirect holdings in a CASP.
Conclusion - We Can Help!
LATEST UPDATES: MICAR
The EBA and ESMA are seeking the public’s input on whether the RTSs and ITSs requirements are clear and comprehensive. Specific questions to which responses are sought are provided after each section of the RTSs and ITSs.
Responses to EBA’s consultation paper are to be provided on or before October 12th, 2023. Furthermore, the deadline for submitting comments on ESMA’s consultation is September 20th, 2023. Comments are to be submitted here and here.
Do you need assistance in implementing the above to your business? Do you have further questions on how to tackle the RTSs and ITSs? Let us know how we can help!
More about MK Fintech Partners Ltd.
Michael Kyprianou Fintech Partners Ltd is a Maltese licensed VFA Agent (virtual financial assets agent). It comprises a team of dedicated experts who provide services such as advisory, licensing and registrations of activities related to Fintech, Crypto, Blockchain, Investment, company incorporations and banking. and other ancillary services. MK Fintech Partners forms part of the Michael Kyprianou Group, a top tier international legal and advisory firm. It has established an enviable reputation as a broad-based legal practice over the years. Mainly by keeping at heart its principle to always exceed its clients’ expectations. MK has grown to become one of the largest law firms in Cyprus with offices in Nicosia, Limassol and Paphos. The MK Group’s international presence also includes fully-fledged offices in Greece (Athens and Thessaloniki), Malta (Birkirkara), Ukraine (Kiev), the United Arab Emirates (Dubai), United Kingdom (London), Israel (Tel Aviv), and Germany (Frankfurt).
The content of this article is valid as at the date of its first publication. It intendeds to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, contact us at MK Fintech Partners via email at contactmkfintech@kyprianou.com or by telephone +356 2016 1010.
