AUSTRIA trends and deve LoPments

Contributed by: Markus Fellner, Florian Kranebitter and Florian Henöckl, Fellner Wratzfeld & Partners

14 of the proposed MiCA. Information as the sole determinant to protect market participants from a default of the legal entity that has issued the crypto-asset, however, will not be sufficient.

If trading of the crypto-asset is permissible, but the legal entity that has provided the cryptoasset suffers from financial distress for any reason, then there will be a high risk of default if the legal entity is not equipped with sufficient liquidity to mitigate the distress scenario. Certainly, the provision of sufficient information is important but legal entities should also be equipped with sufficient liquidity to mitigate financial distress.

The issuing of ART requires that the competent authority (Article 19 of the proposed MiCA) authorise the issuance, because the issuer is (i) a legal entity established in the European Union and received authorisation to issue ART and (ii) an approved crypto-asset white paper of the competent authority has been published (Article 17 and Article 24 of the proposed MiCA). Thus, the issuer of ART has to provide sufficient own funds exceeding EUR350,000 and 2% of the average amount of the reserve assets referred to in Article 32 according to Article 31 of the proposed MiCA.

In contrast to issuers of crypto-assets that are not ART or EMT, issuers of ART have to be authorised by the competent authorities and should have a compliant governance arrangement according to Article 30 of the proposed MiCA in place. The legal basis for this different treatment of ART is that ART provide a cryptoasset that purports to maintain a stable value by referring to the value of several fiat currencies that are legal tender. Therefore, it is more likely that these types of crypto-assets will be traded more compared to non-ART crypto-assets. Similar to the treatment of issuers of ART, issuers of

EMT have to observe stricter rules, because of the intended trading of the EMT and potential risks to consumers.

An issuer of EMT should observe Article 43 of the proposed MiCA as it states that the issuer of such EMT must be authorised as a credit institution or as an “electronic money institution”, has to comply with requirements applying to electronic money institutions and has to publish a crypto-asset white paper notified to the competent authority (Article 46 of the proposed MiCA).

The European Banking Authority (EBA) will be involved in the classification of ART (Article 39 of the proposed MiCA) and EMT (Article 50 of the proposed MiCA) as significant on the basis of the following criteria:

• size of the customer base of the promoters, shareholders of the issuer or any of the thirdparty entities;

• value of the ART (or EMT) or their market capitalisation;

• number and value of transactions in those ART or EMT;

• size of the reserve of assets of the issuer of the ART or EMT;

• significance of the cross-border activities of the issuer, including the number of member states where the ART are used, the use of the ART for cross-border payments and remittances and the number of member states where the third-party entities are established; and

• interconnectedness with the financial system.

In addition, a voluntary classification of ART (Article 40 of the proposed MiCA) or EMT (Article 39 of the proposed MiCA) as significant is possible. Per Article 41 and 52 of the proposed MiCA, the consequence of classification as sig-