The MiCA Regulation[1], enacted by the European Parliament and the Council of the European Union in April/May 2023, is the European Union's legislative response to the rapidly growing cryptocurrency market. It introduces a number of requirements and restrictions designed to ensure the safety of cryptocurrency trading and the protection of cryptocurrency market players, consumers in particular.
A significant part of the Regulation is devoted to rules on the offering and trading of stablecoins (tokens whose value is linked to another value or right or fiat currencies); however, the Regulation also contains provisions for other cryptocurrencies, including utility tokens. Under the MiCA Regulation, the public offering of such tokens is subject to a number of formal requirements.
The essential obligations of an entity offering to sell utility tokens are:
- the preparation of a whitepaper (in the Polish language version of the Regulation referred to as an "information document") meeting the content requirements described in the Regulation, including a set of warnings about the risks associated with the purchase of tokens;
- the whitepaper must be notified to the supervisory authority, which may also request the provision of marketing material; however, the consent/approval of the whitepaper by the authority is not required; the notification must include rationale as to why the cryptocurrency does not fall under the exemptions from the Regulation or is not another type of token as defined by the Regulation (such as an e-money/asset-linked token);
- marketing communications must comply with the requirements set out in the Regulation and be published on the offeror's website;
- the whitepaper must be published on the offeror's website well in advance;
- the results of the offer must be published within 20 working days of the end of the token collection period.
Furthermore, utility tokens can only be offered by legal entities.
Entities offering such tokens must provide for the buyers’ right to withdraw from the purchase within 14 days.
The MiCA Regulation provides for a number of exemptions to the above rules. First of all, the restrictions described above do not apply to certain categories of tokens:
- offered free of charge (while free tokens are not considered to be tokens for which the offeror obtains any benefit, including the purchaser’s personal data );
- created and awarded for maintaining the blockchain or validating transactions (mining);
- tokens which are used to access an existing good or service;
- tokens that can only be exchanged for goods or services at a limited number of entities that have an appropriate agreement with the token provider.
A significant part of the Regulation is devoted to rules on the offering and trading of stablecoins (tokens whose value is linked to another value or right or fiat currencies); however, the Regulation also contains provisions for other cryptocurrencies, including utility tokens. Under the MiCA Regulation, the public offering of such tokens is subject to a number of formal requirements.
The essential obligations of an entity offering to sell utility tokens are:
- the preparation of a whitepaper (in the Polish language version of the Regulation referred to as an "information document") meeting the content requirements described in the Regulation, including a set of warnings about the risks associated with the purchase of tokens;
- the whitepaper must be notified to the supervisory authority, which may also request the provision of marketing material; however, the consent/approval of the whitepaper by the authority is not required; the notification must include rationale as to why the cryptocurrency does not fall under the exemptions from the Regulation or is not another type of token as defined by the Regulation (such as an e-money/asset-linked token);
- marketing communications must comply with the requirements set out in the Regulation and be published on the offeror's website;
- the whitepaper must be published on the offeror's website well in advance;
- the results of the offer must be published within 20 working days of the end of the token collection period.
Furthermore, utility tokens can only be offered by legal entities.
Entities offering such tokens must provide for the buyers’ right to withdraw from the purchase within 14 days.
The MiCA Regulation provides for a number of exemptions to the above rules. First of all, the restrictions described above do not apply to certain categories of tokens:
- offered free of charge (while free tokens are not considered to be tokens for which the offeror obtains any benefit, including the purchaser’s personal data );
- created and awarded for maintaining the blockchain or validating transactions (mining);
- tokens which are used to access an existing good or service;
- tokens that can only be exchanged for goods or services at a limited number of entities that have an appropriate agreement with the token provider.
Example
The operator of an established streaming platform offers a certain group of users the opportunity to purchase a token which gives the holder unlimited access to the films in the database of such a platform. The token is thus used to access an already available service.
A trader handling the loyalty programmes of several shop chains issues tokens to the users of these programmes, which entitle them to discounts on purchases in the shops whose programmes the trader handles. The token can only be exchanged for these discounts.
In the above cases, the offering of tokens is not restricted.
The operator of an established streaming platform offers a certain group of users the opportunity to purchase a token which gives the holder unlimited access to the films in the database of such a platform. The token is thus used to access an already available service.
A trader handling the loyalty programmes of several shop chains issues tokens to the users of these programmes, which entitle them to discounts on purchases in the shops whose programmes the trader handles. The token can only be exchanged for these discounts.
In the above cases, the offering of tokens is not restricted.
Offers are exempt from the obligation to submit a notification to the supervisory authority, publish a whitepaper and publish marketing material:
- addressed to fewer than 150 self-employed natural or legal persons in a Member State of the European Union, or
- with a value of no more than €1 million within 12 months of the start of the offering, or
- addressed exclusively to professional investors (e.g. banks, investment funds, large companies, national and regional authorities), if only they can be token holders.
Example
The offeror directly sends an offer to purchase tokens to the first 100 users of its website from each EU Member State. In this case, the offeror is not obliged to prepare a whitepaper or report it to the supervisory authority.
The offeror directly sends an offer to purchase tokens to the first 100 users of its website from each EU Member State. In this case, the offeror is not obliged to prepare a whitepaper or report it to the supervisory authority.
However, the above exemptions will not apply if the entity offering the tokens or another entity acting on its behalf communicates by any means its intention to release such token for trading (e.g. on a cryptocurrency exchange). In such a case, all the restrictions described above will apply.
The restrictions on the issuance of utility tokens described in this article will apply from 30 December 2024.
[1] Regulation of the European Parliament and of the Council on cryptoasset markets and amending Directive (EU) 2019/1937, https://eur-lex.europa.eu/legal-content/PL/TXT/PDF/?uri=CELEX:32023R1114 (accessed 04.07.2023)