Crypto-assets and crypto-asset services excluded entirely or partly from the scope of the regulation on markets in crypto-assets (MiCAR)

Monitor Prawa Bankowego 2024/07-08 Lipiec/Sierpień

On May 31, 2023, the MiCAR[1], a regulation was adopted laying down uniform requirements for the offer to the public and admission to trading on a trading platform of crypto-assets other than asset-referenced tokens (ARTs) and e-money tokens (EMTs), of ARTs and of EMTs, as well as requirements for crypto-asset service providers (CASPs)[2]. MiCAR applies to natural and legal persons and certain other undertakings that are engaged in the issuance, offer to the public and admission to trading of crypto-assets or that provide services related to crypto-assets in the Union[3].

Bartosz Wyżykowski

In literature it is argued that MiCAR does not regulate crypto-assets as such, but only their markets, i.e., the phenomena comprising their offer, negotiation and exchange, as well as the provision of services related to the foregoing[4]. This may be partly true, however, firstly, regulating actions and services regarding crypto-assets means that indirectly, crypto-assets itself are regulated. Secondly, article 13 of MiCAR refers to an agreement to purchase crypto-assets granting retail holders[5] the right of withdrawal from such an agreement. By doing so, MiCAR does lightly encroach upon the civil law relationship between the offeror of crypto-assets and the retail holder[6].

MiCAR entered into force on June 29, 2023[7], but in principle it will apply from December 30, 2024[8], while titles III and IV of MiCAR shall apply from June 30, 2024[9]. Additionally, transitional measures regulated in article 143 of MiCAR have to be taken into account. The purpose of this article is to discuss the exemptions and exclusions provided for in MiCAR, and in particular in its article 4. As MiCAR uses both the terms „exclusion” and „exemption” throughout the recitals and the legal text, without giving reasons for this differentiation, the same approach is taken in this article, while specific recitals or provisions in MiCAR will be cited using the exact wording of the regulation.  

Classification of exclusions and exemptions under MiCAR

MiCAR does not apply to the entities listed in article 2(2) of MiCAR, including for instance the European Central Bank (ECB)[10], central banks of the Member States when acting in their capacity as monetary authorities, or other public authorities of the Member States[11] (first group of exclusions).

MiCAR also does not apply to certain categories of crypto-assets, namely:

1. crypto-assets that are unique and not fungible with other crypto-assets[12],
2. crypto-assets that qualify as one or more of the elements indicated in article 2(4) of MiCAR, including financial instruments[13], deposits, including structured deposits, and funds, except if they qualify as EMTs[14] (second group of exclusions).

If the prerequisites for one of these exclusions (applicable according to entity status or asset category) are fulfilled, MiCAR does not apply to the given entity or digital asset, even if it meets the definition of a crypto-asset under the regulation[15]. However, if another legal act refers to the term „crypto-asset” in meaning of MiCAR, without simultaneously referring to the aforementioned exclusions, it will in fact encompass a wider spectrum of crypto-assets, than MiCAR. Additionally I would like to underline, that recital 10 sentence 3 of MiCAR seems to be broader than the actual exclusion under article 2(3) of MiCAR. According to the cited recital, MiCAR should not apply to crypto-assets representing services or physical assets that are unique and non-fungible, such as product guarantees or real estate, meanwhile article 2(3) of MiCAR refers only to the non-fungible nature of crypto-assets.

Next we have three groups of exclusions and exemptions, each concerning a given category of crypto-asset, namely exemptions regarding crypto-assets other than ARTs or EMTs, ARTs, and EMTs.

Exemptions regarding crypto-assets other than ARTs or EMTs (third group of exclusions) can be further divided as follows. First there is an exemption from certain obligations in the case of a public offer of crypto-assets other than ARTs or EMTs[16]. These exemptions are modeled on the solutions provided in Regulation 2017/1129[17]. However, it must be clearly emphasized that the exemptions in MiCAR contain important distinctions compared to the solutions provided in Regulation 2017/1129. Additionally, unlike the aforementioned exemptions provided for in articles 2(2)-(4) of MiCAR, in the case of which MiCAR does not apply, the exemptions provided for in article 4(2) of MiCAR do not exclude the applicability of the regulation. They only stipulate an exemption from certain obligations enumeratively listed in this provision. Second, we have the exclusions from title II of MiCAR, that is, the title relating to crypto-assets other than ARTs or EMTs. These are the exclusions provided for in article 4(3) of MiCAR and the accompanying provisions (article 4(4)-(8) of MiCAR). These group three exemptions will be the main subject of this article.

The fourth group includes exclusions applicable to a person making an offer to the public, or seeking admission to trading, of an ART, within the Union[18]. Article 16(1) of MiCAR shall not apply in the cases described in article 16(2) sentence 1 of MiCAR[19]. However, where this exemption applies, issuers of ARTs shall draw up a crypto-asset white paper as provided for in article 19 of MiCAR and notify that crypto-asset white paper and, upon request, any marketing communications, to the competent authority of their home Member State[20].

Finally, the fifth group includes exclusions applicable to EMTs. First, article 48(1) of MiCAR shall not apply to issuers of EMTs exempted in accordance with article 9(1) of EMD[21] (optional exemptions under EMD) [22]. Second, title IV of MiCAR, with the exception of article 48(7) and article 51 of MiCAR, shall not apply in respect of EMTs exempt pursuant to article 1(4) and (5) of EMD[23], which refer to the limited network/limited range exclusion under article 3(k) of PSD2[24] and the telecommunication operator exclusion under article 3(l) of PSD2. Where one of these exemptions applies, the issuers of EMTs shall draw up a crypto-asset white paper and notify such crypto-asset white paper to the competent authority in accordance with article 51 of MiCAR[25].

There also is an additional exclusion regarding EMTs in the upcoming PSR[26]. According to the current wording of article 2(2)(ha) of PSR, this regulation does not apply to payment transactions used for the execution of trading and settlement services using EMTs as defined in article 3(1)(7) of MiCAR, where the payment service provider has already been authorised as a CASP in a Member State for those services under Title V of MiCAR. This exclusion, however, does (...)