EBA publishes new guidance for ‘token issuers’ as part of the upcoming MiCA regulation

The European Banking Authority (EBA) has provided comprehensive guidance on recovery plans for issuers of asset-linked tokens (ARTs) and electronic money tokens (EMTs) as part of the broader Markets in Crypto Assets (MiCA) Regulation.

Under MiCA, ARTs are digital tokens backed by assets such as commodities, real estate or a diversified basket of assets, while EMTs are tokens pegged to fiat currencies to maintain a stable payment value – also known as stablecoins.

The guidance aims to ensure that robust recovery plans are in place to maintain compliance with regulatory requirements in the event that issuers fail to meet asset reserve standards.

Recovery and disclosures

The EBA guidelines require issuers to develop recovery plans that include a summary of key elements, governance details, recovery options and a communication strategy.

These plans must include a comprehensive framework of indicators to monitor the financial health and operational stability of the issuer, including a critical delinking risk indicator to track the consistency between the token’s market price and the value of the reference asset.

The guidelines take into account the principle of proportionality, ensuring that the requirements of the recovery plan are consistent with the size, complexity and business model of the issuer.

According to the EBA, this approach provides flexibility, enabling issuers to develop practical and effective recovery plans tailored to their unique circumstances.

For tokens issued by multiple entities, the guidance highlights the importance of coordination to ensure uniform recovery plan metrics, consistent recovery options, and fair treatment of all token holders.

Transparency

The guidelines focus particularly on ensuring transparency. Issuers are required to develop communication strategies to inform token holders and other interested parties about the implementation of recovery options.

They must also manage potential adverse market reactions and ensure that interested parties are aware of the steps taken to restore compliance. The guidelines specify that recovery plans should include transparent internal decision-making processes and timely communication with relevant authorities.

The EBA has developed these guidelines following a public consultation that ended in February 2024, taking into account feedback from various industry stakeholders. The final guidance balances regulatory oversight with operational flexibility, aiming to strengthen the resilience of the EU cryptocurrency market.

Issuers must comply with these guidelines and report to EBA on their compliance status. The guidelines will enter into force two months after publication on the EBA website, providing issuers with a clear framework to maintain sound recovery plans.

The EBA said that formalizing these guidelines is a significant step towards ensuring the stability and reliability of the rapidly growing cryptocurrency industry in the EU.