Debunking Crypto-Assets: A New Technology, but Traditional Assets
In recent years, the use of crypto-assets, and wider asset tokenisation, has gained momentum within the European Union (EU) financial sector.Tokenisation refers to the process of representing rights in a digital form, using distributed ledger technology (DLT) or similar technology. Tokens can represent rights directly (and exclusively) on the DLT as ‘native tokens,’ or they can represent rights to ‘off-chain’ assets or services (‘non-native tokens’) that exist outside the setting of the DLT.
In principle, all real-world assets could be tokenised to harness the benefits of DLT, namely higher efficiency of transactions using programmability, cost reduction, traceability, and immutability of transactions. Such assets could encompass anything from shares, bonds, or different kinds of property — even a bottle of wine! The use of a token could enable trading without moving the good itself to avoid damage if displaced from its storage, and to ensure immutability of the ownership right represented in a form of a token. This ‘ledger’ advantage notably underpins the growth of crypto-assets nowadays.
Here at the European Banking Authority (EBA), we are particularly interested in the tokenisation of the payment leg of transactions and acceptance of deposits; entities within our remit, namely credit institutions (banks), electronic-money institutions (EMIs) and payment institutions, are contemplating use cases involving the deployment of stablecoins and, in the case of banks, tokenised deposits claiming to improve the efficiency of transactions.
Same Activity, Same Risks, Same Rules
In the EU, the principle of technology neutrality is enshrined in financial services legislation, including in the Regulation on Markets in Crypto-Assets (MiCA).[1] Financial activities are regulated based on their function and the risks they pose rather than the technology used for their operations. This approach aims to promote innovation while maintaining a level playing field across financial sector entities, and future-proofing regulation.
MiCA establishes a bespoke regulatory regime for specific activities involving crypto-assets that are not otherwise regulated by existing EU financial services regulation. This includes issuing and offering to the public in the EU electronic-money tokens (EMTs) and asset-referenced tokens (ARTs), for which the Regulation confers on the EBA a supervisory convergence and — upon certain conditions — direct supervision role. More stringent requirements apply to EMTs and ARTs than for other types of crypto-assets within the scope of MiCA given the use of EMTs (or, in the case of ARTs, potential use) as an alternative means of payment. Following the technology neutrality principle, MiCA expressly …
[1] Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets (MiCA), OJ L 150, 9.6.2023.
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