The European Union's Markets in Crypto-Assets Regulation (MiCA) is set to come into full effect in January 2025, introducing comprehensive rules for the crypto industry across the European Union. While the broader ecosystem (crypto asset service providers) may be subject to regulation under MiFID II or MiCA, it does not directly impact Valour as an issuer of Exchange Traded Products (ETPs).
MiCA and Crypto-Assets
MiCA represents a landmark regulatory framework for the crypto industry in the EU, aiming to provide legal certainty, enhance consumer protection, and support innovation while maintaining financial stability. Full implementation of MiCA is set to happen in January 2025.
MiCA applies to crypto-assets not covered by existing financial services legislation, including e-money tokens, asset-referenced tokens, and other tokens.
Especially, Crypto issuers must publish detailed white papers outlining specifics of crypto-assets, potential risks, and environmental impacts.
White papers must be transparent, fair, and non-misleading and contain detailed information that mimick what is required in a prospectus. This is set to create a significant change in the writing of white paper and include requirements that are not seen in other parts of the world, enhancing consumer protection while posing a significant regulatory burden for companies targeting EU clients.
Crypto Asset Service Providers (CASPs) will need to obtain authorization to provide crypto asset services relating to crypto assets within the EU, such as custody, crypto asset trading platforms, exchange of crypto assets for other ones or funds, advice, portfolio management, etc . As usual, the “target test” will apply and non-EU companies targeting EU clients must comply with MiCA standards and may need to establish an EU presence.
Providers must act in clients' best interests, offering transparent information about pricing, fees, and risks. Especially, Client assets must be kept separate from providers' own assets. Prompt and effective handling of client complaints is required.
The first companies to obtain a MiCA license in early 2025 will gain significant prestige and the ability to offer services across the entire EU. CASPs authorized under national law can continue operating based on existing licenses until December 31, 2025. By mid-2025, the European Commission will report on the need for additional laws to address NFTs and decentralized finance. Other EU laws impacting the crypto sector, such as those addressing money laundering, tax avoidance, and cybersecurity, will complement MiCA.
MiCA creates a regulatory framework for crypto-assets that are not covered by existing financial services legislation. This regulation focuses on the issuance, trading, and custody of crypto-assets, as well as the provision of crypto-asset services. Conversely, MiCA does not apply to crypto-assets that qualify as financial instruments under MiFID II.
MiFID II
Under MiFID II, transferable securities are defined as classes of securities negotiable on the capital market, excluding instruments of payment. These include:
1. Shares in companies and equivalent securities
2. Bonds and other forms of securitized debt
3. Any other securities giving the right to acquire or sell transferable securities or leading to cash settlement
While the provision of investment services related to these securities is regulated, the issuance of transferable securities itself is not a regulated activity under MiFID II.
Valour
The issuance of transferable securities linked to underlying assets is not inherently a regulated activity under MiFID II or MiCA. This remains true regardless of how the relevant underlying assets are classified or treated under these regulatory frameworks. Furthermore, the regulatory status of parties providing services related to these securities does not affect the issuer's position. In essence, the issuer's regulatory status remains unchanged under MiFID II or MiCA, irrespective of the nature of the underlying assets or the regulatory obligations of associated service providers.
The act of issuing transferable securities linked to underlying assets does not, by itself, subject the issuer to regulation under MiFID II or MiCA. The regulatory
treatment of the underlying assets (whether they are traditional financial instruments or crypto-assets) does not directly impact the issuer's regulatory position. Similarly, even if parties providing services related to these securities are regulated under MiFID II or MiCA, this does not alter the regulatory status of the issuer.
The issuer's regulatory position therefore remains consistent, regardless of the complex interplay between the securities, their underlying assets, and the broader regulatory environment.
While the issuance itself may not be a regulated activity, Valour comply will continue to comply with other regulatory obligations, such as disclosure requirements or compliance with securities laws, depending on the nature of their offerings and the jurisdictions in which they operate.
Key Takeaways
* The issuance of transferable securities linked to underlying assets is not itself a regulated activity under MiFID II or MiCA.
* The regulatory status of the underlying assets does not change the issuer's regulatory position.
* However, the broader ecosystem (service providers, traders, etc.) may be subject to regulation under MiFID II or MiCA.
* Issuers should continue to comply with other potential regulatory obligations, such as disclosure requirements.
Valour will continue to monitor the evolving regulatory landscape, as interpretations and applications of these regulations may change over time.
Risks
An investment in transferable securities is always associated with risks. An investment may increase or decrease in value at different points in time and may perform differently than expected at the time of the investment decision. The risks associated with investments in the issuer’s transferable securities are described the issuer’s Base Prospectus and summarized in the issuer’s Key Investor Documents (or KIDs). Prospective purchasers of the securities offered under the Base Prospectus should consider carefully, among other things and in light of their financial circumstances and investment objectives, all of the information in the Base
Prospectus (including any documents incorporated by reference herein) and, in particular, the risks set forth below (which each Issuer, in its reasonable opinion,
believes represents or may represent the risks known to it which may affect such Issuer's ability to fulfil its obligations under the securities) in making an investment
decision. Investors may lose the value of their entire investment in certain circumstances.
Where to find the Base Prospectus and other relevant product information
The issuer’s published Base Prospectus, Final Terms, KIDs and other relevant
product information is available here.
