Delegated Regulation (EU) 2024/1506 MICA: Classification of Asset-Referenced Tokens and Electronic Money Tokens

Delegated Regulation (EU) 2024/1506 MICA: Classification of Asset-Referenced Tokens and Electronic Money Tokens

In the fast-paced world of cryptocurrencies and digital assets, the European Union has taken steps to establish a robust regulatory framework. One of the most recent milestones is Delegated Regulation (EU) 2024/1506, issued by the European Commission on February 22, 2024, and published in the Official Journal of the European Union on May 30, 2024. This Regulation is designed to complement Regulation (EU) 2023/1114 of the European Parliament and of the Council, more commonly known as the MICA Regulation. This Delegated Regulation focuses on the classification of two types of tokens: asset-referenced tokens and electronic money tokens, as these figures were incomplete and unclear in the MiCA Regulation.

Regulation (EU) 2023/1114 (MICA) addresses the markets for crypto-assets and establishes provisions for their operation within the EU. Among its objectives are the protection of investors and the promotion of innovation in this area. However, in order to achieve effective regulation, it is necessary to define clear criteria for classifying digital tokens referenced to electronic money, which were not covered by the classification in Article 43(1) and therefore, for practical purposes, were insufficient.

Delegated Regulation (EU) 2024/1506 extends the scope of the previous regulation to include electronic money tokens, as well as adding more clarity and definition to what was already set out in Article 43. These tokens, which represent a value stored on an electronic medium, are increasingly being used in digital transactions. Therefore, their classification is crucial to ensure financial stability and user protection.

In this sense, the delegated regulation includes, among others, the following criteria to facilitate the classification of the aforementioned tokens:

• Market capitalization

Market capitalization is a fundamental indicator to assess the importance of a token. If its capitalization exceeds a specific threshold, it is considered significant. This reflects the relevance of the token in the global crypto-asset market.

• Trading volume

Liquidity is essential in financial markets. The trading volume of a token is a key indicator. The higher the volume, the greater the liquidity and, therefore, the greater its significance.

• Interconnection with the financial system

A token may have a systemic impact if it is closely linked to the financial system. Its interconnection with other assets and its potential to affect overall stability are assessed.

• International presence

A token that is traded in multiple countries has a global presence. This is also considered a factor in determining its significance.

In addition to the foregoing, the Regulation also provides the European Banking Authority (EBA) and users with the necessary formulas to understand how they are classified in this situation.

This Delegated Regulation (EU) 2024/1506 entered into force on May 30, 2024 and will take effect 20 days after its publication in the Official Journal of the European Union (OJEU), that is, on June 19. From that date, authorities and market participants must apply these criteria to classify asset-referenced tokens and electronic money tokens.

The classification of digital tokens is a crucial step for the effective regulation of crypto-asset markets. Delegated Regulation (EU) 2024/1506 provides clear guidance for assessing the significance of these tokens. As technology advances and markets evolve, this regulation will continue to be essential to protect investors and ensure financial stability.

If you have a project that uses digital tokens (tokens) of any kind, at Letslaw we can help you define the legal framework that best suits your needs.