Whitepaper: What is it and what should it include

Whitepaper: What is it and what should it include

In today’s article, we will talk about the Whitepaper, focussing on what is it and what should include. The concept is commonly known by users and cryptoasset experts.

The focal point will be the analysis of the new Regulation on Markets in Crypto Assets on Markets in Crypto Assets   (EU) 2023/1114 of the European Parliament and of the Council, dated May 31, 2023, regarding cryptoasset markets and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937, hereinafter referred to as “MiCA,” we will focus on the Whitepaper, commonly known as Whitepaper by users and cryptoasset experts.

Until now, the so-called Whitepaper was not mandatory for all existing cryptoassets. However, with the entry into force of MiCA, this landscape changes, becoming necessary for all tokens covered by the regulatory framework of MiCA, even for those cryptoassets that do not require prior authorization from the CNMV to be issued.

In this regard, the Regulation exempts from this obligation all tokens that were issued prior to the approval of MiCA.

What is the Whitepaper?

Now, what do we mean by Whitepaper? When we speak of a Whitepaper in a general sense, we refer to a document that is usually technical and explains in detail and depth a complex subject. 

Outside the crypto field, it refers to a unique and technical document that typically focuses on developing a complex subject in depth, presenting both the research on a subject and the specific solution to the proposed problem in that subject. 

However, when we talk about Whitepaper in the crypto field, we refer to the document that includes technical and precise information about the token to be issued, as well as the team that develops it and its intended purpose. 

MiCA has gone a step further, specifying at all times what the Whitepaper should consist of or include to provide sufficient information about each token issued, so that it serves as a guarantee or information to future investors of said token.

What should a Whitepaper include?

MiCA dedicates Article 5 of Title II to describing the content and format that this document must contain. In this regard, we will now break down the essential aspects that must be included in the Whitepaper:

1. Description of the issuer and key participants: The Whitepaper must provide a detailed description of the issuer of the cryptoasset, i.e., the entity responsible for launching and managing the project.

 Additionally, it should introduce the key participants involved in the design and development of the project, allowing for an assessment of their experience and credibility.

2. Project details and type of cryptoasset: A comprehensive description of the issuer’s project is required, including the type of cryptoasset that will be offered to the public or whose admission to trading is sought. 

The reasons behind the public offering or the request for admission to trading should also be explained, as well as how the funds obtained through the public offering will be used, whether in fiat currency or other cryptoassets.

3. Characteristics of the public offering: The Whitepaper should provide detailed information on the characteristics of the public offering, such as the number of cryptoassets to be issued or requested for trading, the issuance price of the cryptoassets, and the subscription conditions. 

These details are essential for investors to understand the conditions and scope of the investment.

4. Rights and obligations associated with the cryptoassets: It is important for the Whitepaper to describe in detail the rights and obligations that investors will have when acquiring the cryptoassets. 

In addition, the procedures and conditions for exercising such rights should be explained. This information will ensure that investors fully understand the benefits and responsibilities involved in their investment.

5. Underlying technology and applied standards: Since cryptocurrencies and digital assets are based on blockchain technology, the Whitepaper must provide information about the underlying technology used in the project. 

Additionally, the standards applied by the issuer regarding the maintenance, storage, and transfer of the cryptoassets should be mentioned. This will provide a clear understanding of the project’s security and efficiency.

6. Associated risks: The Whitepapershould also address the risks associated with both the issuer of the cryptoassets and the cryptoassets themselves. This includes financial, technological, regulatory, and market risks. 

It is essential for investors to be fully informed about the potential risks before making an investment decision in the specific token.

Furthermore, the same article continues to establish that all the aforementioned information must be presented impartially, clearly, and free from deception. It should be presented in a concise and understandable manner for all readers.

In addition, the issuer must include a disclaimer stating that they are responsible for the content of the Whitepaper and that it has not been reviewed or approved by any competent authority of the European Union.

Moreover, it should not contain claims about the future value of the cryptoassets unless the issuer can guarantee such value. This is done to avoid the creation of unfounded expectations in investors and promote a more realistic and objective view of the associated risks and opportunities.

In summary, all the information that the Whitepaper must contain is fundamentally aimed at ensuring transparency and protecting the investors and consumers of the tokens. It seeks to provide clear and objective information.

At Letslaw, we have experience in the crypto field. If you work in the crypto world and need legal assistance and advice to guide your project and ensure legal security, do not hesitate to contact us.