# What are Asset-Referenced Tokens (ARTs) under MiCA?

According to Article 3(1)(6) of MiCA, an Asset-Referenced Token (ART) means “*a type of crypto-asset that is not electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies*”.

The definition begins by excluding [Electronic Money Tokens ("EMTs)](/basics/what-are-e-money-tokens-emts-under-mica) from the scope of ARTs. As both share common characteristics envisaged by purporting to maintain a stable value, the legislator felt the need to expressly exclude EMTs from the definition of ARTs. Consequently, any tokens that qualify as an EMT cannot concurrently also qualify as an ART, even if they match the rest of the definition of ARTs.

ARTs purport to maintain a stable value by referencing another value, right, or a combination of them, which can include one or more official currencies. Based on this definition, ARTs can be seen as another form of “stablecoins” introduced by European legislators. However, their ability to maintain a stable value by reference to another value or right outlines a different intention behind the classification of these assets. As highlighted in Recital 18, “*so as to avoid circumvention and to make this Regulation future-proof*” the legislators tried to prevent scenarios where crypto-assets would reference the value of an [EMT](/basics/what-are-e-money-tokens-emts-under-mica), which in turn references the value of an official currency, thereby circumventing the application of the rules related to EMTs. Moreover, the definition expressly captures any crypto-assets that purport to maintain a stable value, not only those that effectively manage to maintain a stable value.

Furthermore, ARTs may be seen as a catch-all category that encompasses all crypto-assets purporting to maintain a stable value, excluding those falling within the definition of EMTs. However, in its Third Consultation Package, ESMA warns that if a crypto-asset shares common features with any type of financial instrument – referred to as “hybrid” crypto-assets – such crypto-asset will be considered as a financial instrument and the application of MiFID II prevail over MiCA’s dispositions.


# What are E-Money Tokens (EMTs) under MiCA?

Article to Article 3(1)(7) MiCA defines an Electronic Money Token (EMT) as “*a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency*”. By way of extension, official currency refers to “*an official currency of a country that is issued by a central bank or other monetary authority*”.

The definition of an EMT encompasses any crypto-assets purporting to maintain a stable value by reference to an official currency. As outlined in Recital 41, the definition does not differentiate EMTs depending on how they purport to maintain a stable value, meaning EMTs can be collateralised or based on an algorithmic mechanism. Furthermore, the definition expressly captures any crypto-assets that purport to maintain a stable value, not only those that effectively manage to maintain a stable value. Any crypto-asset aiming to maintain a stable value by referencing the value of an official currency regardless of the reserve or stabilisation mechanism falls under the definition of EMTs. \[PG1] 

It is important to note that Electronic Money Tokens or EMTs should not be confused with electronic money. Electronic money is defined in Article 2(2) of the E-Money Directive (Directive 2009/110/EC) as “*electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in point 5 of Article 4 of Directive 2007/64/EC \[Payment Services Directive], and which is accepted by a natural or legal person other than the electronic money issuer*”.

Following closely this reasoning, electronic money and EMTs are two different types of assets: electronic money that is not stored electronically using distributed ledger technology is regulated under the E-Money Directive, while electronic money which is stored or uses distributed ledger technology (ergo EMTs) is regulated under MiCA.

This being said, things tend to become more complicated when considering the provisions of Title IV of MiCA related to EMTs. The title starts with Article 48, which explicitly states that “*E-money tokens shall be deemed to be electronic money*” and that “*Titles II and III of Directive 2009/110/EC shall apply with respect to e-money tokens unless otherwise stated \[in this Title]*”. \[PG2] If EMTs are reputed to be electronic money and the dispositions regulating electronic money apply to EMTs, one may argue that EMTs and electronic money are most likely the same thing. Albeit, EMTs and electronic money are similar but not the same. Notably, the modalities of issuance of EMTs differ from the modalities of issuance of electronic money, in particular by virtue of Article 49 which stipulates that only the specific requirements set forth shall apply to issuers of EMTs . Moreover, EMTs can also be offered to the public in a similar fashion to traditional financial products, which is not the case for electronic money.


# What is a Crypto-Asset Service Provider (CASP) under MiCA?

MiCA defines a CASP, under Article 3(1)(15), as a “*legal person or other undertaking whose occupation or business is the provision of one or more crypto-asset services to clients on a professional basis, and that is allowed to provide crypto-asset services in accordance with Article 59*”.

This definition can be broken down into 6 distinct elements as follows:

1. A legal person or other undertaking;
2. Acting by way of an occupation or business;
3. The provision of one or more crypto-asset services;
4. Targeting clients;
5. On a professional basis;
6. Authorisation to provide crypto-asset services

With reference to point (3) of the definition of CASP, MiCA defines a ‘crypto-asset service’ as “*a service or activity which is provided in relation to any crypto-asset*”. The following is an exhaustive list of ‘crypto-asset services’:

* Providing custody and administration of crypto-assets on behalf of clients;
* Operation of a trading platform for crypto-assets;
* Exchange of crypto-assets for funds;
* Exchange of crypto-assets for other crypto-assets;
* Execution of orders for crypto-assets on behalf of clients;
* Placing of crypto-assets;
* Reception and transmission of orders for crypto-assets on behalf of clients;
* Providing advice on crypto-assets;
* Providing transfer services for crypto-assets on behalf of clients.

It must be emphasised that a person providing crypto-asset services without being allowed to provide such services in accordance with Article 59 does not fall within the definition of a CASP. Instead, such person will be put on a register of entities that provide crypto-asset services in violation of Article 59 or 61, as provided for in Article 110 of MiCA.


# What are significant ARTs and EMTs under MiCA?

[ARTs](/) and [EMTs](/basics/what-are-e-money-tokens-emts-under-mica) classify as significant when they meet or are likely to meet the criteria laid out in Article 43 and Article 56, for ARTs and EMTs respectively. Recital 59 of MiCA explains that the reason for introducing such classification is because ARTs and EMTs “*could be used by a large number of holders and their use could raise specific challenges in terms of financial stability, monetary policy transmission or monetary sovereignty*”. It is for this reason that “*ARTs and EMTs should be deemed significant when they meet or are likely to meet, certain criteria*”.

ARTs are classified as significant where at least three of the following criteria, which are set out in Article 43(1) of MiCA, are:

(a)   the number of holders of the ART is larger than 10,000,000;

(b)   the value of the ART issued, its market capitalisation or the size of the reserve of assets of the issuer is larger EUR 5,000,000 respectively;

(c)    the average number and average aggregate value of transactions in that ART per day during the relevant period, is higher than 2,500,000 transaction and EUR 500,000,000 respectively;

(d)   the issuer of the ART is a provider of core platform services designated as a gatekeeper in terms of the Digital Markets Act (Regulation (EU) 2022/1925);

(e)   the significance of the activities of the issuer of the ART on an international scale;

(f)    the interconnectedness of the ART or its issuers with the financial system;

(g)   the fact that the same issuer issues at least one additional ART or EMT, and provides at least one crypto-asset service.

Following in closely, Article 56 deals with the classification of EMTs as significant. The classification of EMTs as significant is built on the same criteria laid down for the classification of significant ARTs, “*where at least three of the criteria set out in Article 43(1) \[of MiCA] are met*”.

Another notable difference between regular ARTs or EMTs and significant ARTs or EMTs is the specific additional obligations for issuers of these crypto-assets. Article 45 and Article 58 for ARTs and EMTs respectively, stipulate the additional obligations of issuers of significant ARTs and EMTs. These issuers are subject to higher capital requirements, to interoperability requirements and they should also establish a liquidity management policy.

 


# What are ‘privacy tokens’?

MiCA refers to ‘inbuilt anonymisation functions’ in Article 76 of MiCA, however, it is the sole instance where the legislator mentioned crypto-assets using such functions within the entire text of MiCA. The term refers to technologies that enhance privacy, and protect user identities and transaction history. From a more technical perspective, the term usually refers to functionalities implemented within crypto-assets or their DLT that automatically anonymise transactions and/or user data. The text of Article 76 calls for several observations.

Firstly, the wording “*the operating rules of the trading platform for crypto-assets shall prevent the admission to trading of crypto-assets that have an in-built anonymisation function …*” in Article 76 implies a prohibition. It must be emphasised that this prohibition does not apply to all CASPs, but only to those operating a trading platform. This means that other CASPs are not prohibited from offering crypto-asset services, such as the custody and transfer of crypto-assets on behalf of clients, in relation to crypto-assets that have an inbuilt anonymisation function. More arguably, MiCA also does not prohibit the execution of orders or the reception and transmission of orders in relation to these crypto-assets.

Secondly, in the Consultation Paper titled ‘Technical Standards specifying certain requirements of MiCA – second consultation paper’, the European Securities and Markets Authority (ESMA) proposed a list of records to be kept by CASPs, depending on the nature of their service and activities. Under the regulators’ guidelines, CASPs operating a trading platform for crypto-assets must keep records of cases where crypto-assets have an in-built anonymisation function.