Legal news

Regulation (EU) 2023/1114 of the European Parliament and of the Council of May 31, 2023 on MiCA (Markets in Crypto-Assets), Règlement (UE) 2023/1114 du Parlement européen et du Conseil du 31 mai 2023 sur les marchés de crypto-actifs, adopted by the European Parliament and the Council on May 31, 2023, came into force on December 30, 2024.
It establishes a harmonized framework for the regulation of crypto-assets within the European Union, including Bitcoin.

I. Objectives and scope of the MiCA regulation

The main aim of the MiCA regulation is to protect consumers and ensure financial stability, while combating money laundering and the financing of terrorism.
It establishes a specific normative framework for crypto-assets, including Bitcoin, distinguishing three main categories:

• Utility tokens, which provide access to a specific product or service;
• Tokens referring to one or more assets often associated with property rights or underlying assets; and
• Electronic currency tokens (stablecoins) that are directly linked to a fiat currency or a basket of fiat currencies.

Although Bitcoin does not fit into any of these categories directly, it is nevertheless subject to some of the regulations established by MiCA.

II. Obligations for Bitcoin creators

1. Registration and licensing

Bitcoin creators, as actors enabling the management or facilitation of the use of Bitcoin within the EU (for example, exchange platforms or custody service providers), must obtain approval from a national competent authority before they can offer their services on the European market.
Approval provides a European passport, making it easier to offer services in all EU member countries.

2. Transparency and information

Bitcoin creators must ensure that information about the services they offer is transparent and accessible.

An information document, or “white paper”, must be drawn up, detailing:

• The characteristics of Bitcoin ;
• The risks associated with their use; and
• The costs and fees associated with Bitcoin transactions.

This document must comply with the transparency and information requirements of the MiCA regulation, which requires disclosure of all relevant information so that consumers can make an informed decision.

3. Anti-money laundering (AML)

MiCA requires Bitcoin creators to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) rules.

In concrete terms, this involves the obligation to track user transactions and set up a system for tracing crypto-asset transfers.

Providers must also verify the identity of their customers and report any suspicious activity to the relevant authorities.

4. Specific obligations for crypto-asset service providers (CSPs)

Crypto-asset service providers (CASSPs), such as Bitcoin exchange platforms or storage services, must meet strict requirements to operate legally in the EU. Among the points to watch out for:

Obtaining approval:

Check that PSCAs have obtained the necessary approval to offer exchange, storage or other Bitcoin-related services in the EU ;

Anti-money laundering rules:

Ensure that PSCAs comply with AML and CFT requirements;

Internal control and compliance:

Confirm that PSCAs must implement an internal control system to ensure compliance with regulatory obligations, particularly with regard to the security of user funds and risk management; and

European passport:

Verify that PSCAs can benefit from the European passport to offer their services throughout the EU once they have obtained their license.

5. Consumer protection and transparency

The MiCA regulation aims to guarantee consumer protection and ensure transparency in trading with crypto-assets, including bitcoin.

As such:

Publication of the white paper:

Bitcoin creators must publish a document detailing the risks, costs and implications of transactions.

Consumer information:

Ensure that consumers are fully informed of the risks involved in using Bitcoin and the costs associated with each transaction.

PSCA behavior:

PSCAs must act honestly, fairly and professionally in accordance with the standards of transparency and accountability imposed by MiCA.

6. Prevention of market abuse

Market abuse prevention rules applicable to crypto-assets must be observed, in order to combat market manipulation and fraud.

Bitcoin creators must ensure that transactions on their platforms are not used to manipulate prices or conduct illegal activities.

7. Transitional period and national adaptation

Service providers already registered under national regimes have a transitional period until July 1, 2026 to comply with the requirements of the MiCA Regulation.

Bitcoin creators will have to ensure that their practices comply with European requirements by this deadline.

In France, national adaptations are to be put in place to facilitate this transition, with enhanced registration requirements for crypto-asset service providers.

III. Combating fraud and tax evasion

MiCA is part of a broader framework to combat tax evasion.

Crypto-asset service providers must comply with specific reporting obligations and ensure that Bitcoin exchanges are transparent, with automatic exchanges of tax information between competent authorities.

The new tax obligations must be strictly complied with to avoid the risk of fraud.

Nicolas BRAHIN Avocat
Lawyer in NICE
Master’s Degree in Banking and Financial Law
Cabinet BRAHIN Avocats 1, Rue Louis Gassin – 06300 NICE (FRANCE)
MOB: +33 493 830 876 / Fax : +33 493 181 437
Email : nicolas.brahin@brahin-avocats.com
www.brahin-avocats.com

Article L. 320-1 of the French Internal Security Code, (sécurité intérieure “CSI”) sets out the principle of a total ban on lotteries: “games of money and chance are prohibited”.

According to Ordinance no. 2019-1015 of October 2, 2019 reforming the regulation of gambling and games of chance (régulation des jeux d’argent et de hasard), four criteria are required to qualify a lottery:

• The offer to the public;
• The expectation of a win, in cash or in kind;
• The intervention of chance in the designation of the winner(s), in the form of a draw (the most classic hypothesis);
• A subsidiary question relating, for example, to the number of reply forms received, or any process which, in general, makes chance predominate over skill or intelligence; and
• Any form of financial participation.

If these four criteria are met, the lottery is prohibited in principle. This prohibition was reiterated by the Paris Court of Appeal (Cour d’Appel de PARIS) in ruling no. 2003/01523 of November 14, 2003: “lotteries are therefore prohibited only when they cumulatively meet the following four conditions: an offer to the public, the hope of a win, the intervention of chance, a financial sacrifice in order to be able to take part in the game”.

Exceptions to the ban on lotteries

Unfair

Lotteries and gaming machines offered at fairs are authorized without prefectoral authorization, subject to certain conditions:

• Prizes must be in kind,
• The unit stake must not exceed 1.5 EUR and the value of the prizes must not exceed 45 EUR.

These lotteries may be organized by people engaged in itinerant activities.

Personal property

Lotteries of movable objects intended for charitable purposes, the encouragement of the arts or the financing of non-profit sports activities are authorized subject to prior prefectural authorization.

The granting of this authorization is based on several criteria.

• The applicant organization must be primarily dedicated to charity, the encouragement of the arts or a sporting activity; and
• Be non-profit-making.

The seniority of the organization may be taken into account to assess its reliability. Funds raised by lotteries must be used exclusively for specific charitable, arts promotion or non-profit sports activities, and not for operating costs or to cover a deficit. Lottery applications to finance actions for mutual or corporate groups are excluded.

Lastly, lottery issue capital, which corresponds to the total value of tickets issued, must match the needs of the planned actions, with a reasonable ceiling for organization costs, set at 15% of issue capital.

The amount of the issue capital must not exceed the ticket placement capacity, and for a first request, the capital must be low.
Subsequent requests may be considered for higher amounts if previous operations have been regular.

Lottery application procedure

File preparation

Applications for authorization are made using Cerfa form no. 11823*021.

The petitioner must provide the organization’s articles of association, indicating its philanthropic, artistic or sporting aims, as well as the financial statement for the last financial year, necessary if the issue capital exceeds 7,500 EUR, to assess the association’s management, its budgetary balance and the proportion of revenue earmarked for specific actions, and detailed information on the planned operation and the use of funds.

Consultation

If the issue capital exceeds EUR 30,000, the opinion of the Directeur Régional des Finances Publiques is required.

When the operation concerns areas supported by the public authorities, the opinion of the relevant deconcentrated departments must be sought.

Local authorities (mayors) may also be consulted, especially if the operation takes place in one or more specific communes.

Decision

The authorization is formalized by an order after full examination of the file.

The order specifies the destination of the funds and the organizational costs and sets out the penalties for failure to comply with legal and regulatory rules: up to 3 years’ imprisonment, a fine of 90,000 euros, confiscation of gaming machines and possible destruction.

Additional penalties include disqualification from holding certain public offices, confiscation of assets, public dissemination of the decision or closure of the establishments involved.

Post-event control

After the event, you check that the funds raised, and unsold tickets correspond to the authorized issue capital.

Lottery proceeds must be used for the intended purpose, and organizational costs must not exceed 15% of the issue capital.

In the event of minor irregularities, a warning is issued; in the event of serious or repeated irregularities, you inform the Procureur de la République (public prosecutor) and refuse any further authorization.

In the event of poor ticket sales, the issue capital will have to be adjusted for future requests.

Legal framework for lotteries with prizes

Commercial lotteries

Commercial lotteries, which often include gifts, are defined as commercial practices carried out by professionals with regard to consumers, with the aim of awarding a prize or an advantage by means of a draw.

These lotteries are governed by article L. 121-20 of the French Consumer Code (Code de la Consommation) and are not subject to the gambling regulations set out in the French Internal Security Code “CSI”.

Requirements and restrictions

Commercial lotteries must meet certain requirements to be considered legal.

They must not be unfair within the meaning of Article L. 120-1 of the French Consumer Code, which prohibits unfair commercial practices.

Free entry is no longer a condition of validity, and the obligation to reimburse entry fees has been abolished.

Traditional lotteries

The principle laid down in article L. 322-1 of the “CSI” is that “lotteries of any kind are prohibited”. This general prohibition includes lotos.

Article L. 332-4 of the “CSI”, which has taken over the provisions of article 6 of the law of May 21 1836, introduces a temperament to this prohibition by excluding from the provisions of articles L. 322-1 and L. 322-2 “traditional lotos, also known as ‘poules au gibier’, ‘rifles’ or ‘quines’.

Traditional lotos are authorized by article L. 332-4 of the French Code “CSI”. Traditional lotos do not require prior authorization, but must meet certain criteria:

• Organized in a restricted circle and for social, cultural, scientific, educational or sporting purposes; and
• Stakes must not exceed EUR 20, and prizes must be in kind, with no cash or reimbursement. However, non-refundable vouchers are permitted.

These lotos can take place all year round, without prior declaration, provided these criteria are met. Only associations may organize traditional lotos within this framework, as they pursue social objectives. Commercial projects seeking to make a profit in violating these rules are illegal.

Nicolas BRAHIN Avocat, Lawyer in NICE
Master’s Degree in Banking and Financial Law
Cabinet BRAHIN Avocats 1, Rue Louis Gassin – 06300 NICE (FRANCE)
MOB: +33 493 830 876 / Fax : +33 493 181 437
Email : nicolas.brahin@brahin-avocats.com
www.brahin-avocats.com

On foreign companies with real estate predominance

A company is considered to have a real estate predominance if the value of its real estate assets exceeds 50% of the value of all its assets.

Article 4 B of the French General Tax Code (Code Général des Impôts) provides that “the managers of companies whose headquarters are located in France and whose annual turnover exceeds 250 million euros are considered to have their tax domicile in France, unless they provide proof to the contrary. For companies that control other companies under the conditions defined in Article L. 233-16 of the French Commercial Code, turnover is understood to be the sum of their turnover and that of the companies they control.”

There are four pre-established criteria that emerge from this article :

• Nationality;
• Main profession;
• Main place of residence; 
• Economic interest.

On net property income

According to Article 28 of the French General Tax Code, net property income is equal to the difference between the amount of gross income and the total property charges.

That is :
Net property income = Gross rent − (Management fees + Loan interest + Maintenance work + Property tax).

On corporate tax (« Impôt sur les société » or referred to as « IS » below)

In 2024, the corporate tax rate is set at 25% for all companies regardless of their turnover. However, a reduced rate is still applicable for certain companies.
The reduced “IS” rate of 15% concerns SMEs :

• Whose turnover excluding tax is less than 10 million euros ;
• Whose capital is entirely paid out and held at least 75% by individuals (or by a company applying this criterion).

Since January 1, 2023, this reduced rate applies to the share of profits up to 42,500 euros. Beyond that, the profit is taxed at the normal “IS” rate, i.e. 25%.

Calculation of the balance of corporate tax payable :

a) Taxable base = accounting result + tax reinstatements – tax deductions – remaining deficit to be imputed.

b) Gross “IS” = (share of profit x reduced rate) + (share of profit x normal rate) + (share of profit x special rates).

c) Balance to be paid = Gross “IS” – imputable tax receivables.

d) Corporate tax “IS”: Net property income x “IS” rate (25% in 2024).

Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NICE
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
www.brahin-avocats.com

Here are some important rules on inheritance in France.

1-WHO ARE THE HEIRS IF THE DECEASED WAS MARRIED?

A) Priority children:

In the absence of a will, the deceased’s assets are distributed according to the legal rules.
Children have priority. They exclude other members of the deceased’s family, except the surviving spouse, with whom they share the entire estate.

B) On the surviving spouse:

The husband or wife always, and automatically, receives a share of the estate. When the deceased leaves only children from the couple, the surviving spouse inherits either the entire estate in usufruct, or full ownership of a quarter of the estate. The choice is theirs.
The children receive the remainder, i.e. bare ownership of the entire estate, or full ownership of three-quarters of the estate. The estate is divided equally between the children.
In the case of children from a previous marriage, the spouse inherits one-quarter of the estate in full ownership, with no option to opt for usufruct. Thus, in such a case, all the children (whether common to the couple or not) always share three-quarters of the estate in full ownership.

C) Absence of children:

The surviving spouse inherits the entire estate if the deceased’s parents are also deceased. Siblings, nephews and nieces are excluded from the estate. On the other hand, if both parents of the deceased are still alive, they receive half the inheritance. In this case, the widow or widower receives the remaining half (three-quarters if only one parent is alive).

D) On the prior death of a child:

If one of the deceased’s children has died, the grandchildren take the place of their predeceased father or mother, sharing the share of the estate he or she should have received.
They are said to come in “representation” of their father or mother. On this occasion, they share equally in the abatement to which their parents were entitled.

GOOD TO KNOW:
Drawing up a will allows you to change the rules of inheritance, by increasing the rights of a spouse, favoring a child, protecting a civil union partner, or benefiting an association.

2-WHAT ARE THE SPOUSE’S RIGHTS TO THE HOME?

A) The minimum one-year protection period:

During the year following the death, the surviving spouse can live in the couple’s home free of charge (even if it is the deceased’s own property) and use the furniture. They do not have to leave their home in a hurry, and their living environment is protected. The value of this right does not reduce his share of the inheritance. If the couple were tenants, the rents paid by the surviving spouse are reimbursed for one year by the estate (i.e. by the heirs).

B) Lifetime rights:

After this one-year period, ii can still live in the property and use the furniture for the rest of his life. There is no point in asking for this if he does not inherit or if he inherits a share of the estate in full ownership. This is because, if he or she inherits the entire estate in full ownership or usufruct, ii already benefits from the use of the home and furniture for the rest of his or her life. With this life interest, the spouse continues to occupy the home beyond the first year. The value of this right is deducted from his or her inheritance rights and is therefore deducted from his or her share of the inheritance (if it exceeds the latter, he or she does not have to compensate the other heirs).

C) On the limits of the life estate:

The surviving spouse retains this right of use and habitation even if he or she remarries. However, he/she is obliged to live in the property personally: it cannot be rented out, unless he/she needs to obtain the necessary resources to move into a home or establishment suited to his/her needs. The other heirs cannot oppose this right. However, by mutual agreement with the surviving spouse, they can convert it into a life annuity or capital sum.

D) On the will of the deceased:

As the temporary right of one year is a direct consequence of marriage, the surviving spouse cannot be deprived of it. On the other hand, as the lifetime right of habitation is of an inheritance nature, the deceased could, during his lifetime, deprive his spouse of it by authenticated will. This option is worth considering if the family home is a family asset and the children of a first marriage do not wish to see their step-parent live there.

GOOD TO KNOW:
If the surviving spouse is in joint ownership with other heirs, he/she has priority in obtaining ownership of the home and its furnishings when the estate is divided.

3-WHO ARE THE HEIRS IF THE DECEASED WAS NOT MARRIED?

A) On orders of inheritance:

Family members are called upon to succeed in this way:

– 1st order heirs: children and their descendants (grandchildren, great-grandchildren… ) ;
– 2nd order heirs: father and mother; brothers and sisters and their descendants (nephews, nieces);
– 3rd-order heirs: ascendants other than father and mother (notably grandparents);
– 4th-order heirs: collateral relatives other than brothers and sisters, and their descendants (uncles, aunts, cousins up to and including the 5th degree).

Each of these four categories constitutes an order of heirs that excludes the following. In practical terms, if there are no heirs in the 1st order, those in the 28th order take precedence over those in the 3rd and 48th orders, and so on.

Please note that in the case of cohabitants and PACS partners, the surviving spouse will not inherit if he/she has not been named as heir in a will.

B) On sole children as heirs :

When the deceased leaves children, they displace all other family members and share the estate equally among the sole heirs. In other words, parents, siblings, cousins, etc. receive nothing.

C) On the rest of the family:

In the absence of children (or grandchildren to represent them), heirs of the second order are called upon to succeed the deceased. The deceased’s father, mother, brothers and sisters share the estate. Each parent receives a quarter of the deceased’s estate, and the siblings (or their children in the event of pre-decease) share the remaining half equally. If only one of the deceased’s parents is alive, he or she inherits one-quarter of the estate, with the brothers and sisters sharing the remaining three-quarters equally. If both parents are deceased, the brothers and sisters inherit the estate.

D) Divorce proceedings :

As long as the spouses are not divorced, they remain heirs to each other. If one of them dies, the survivor receives part of his or her estate, and even the whole estate if the deceased had no children and his or her parents are no longer alive. If this is not the case, a will must be drawn up to disinherit the other.

Note that if there are no children, it is not possible to completely exclude your spouse, who becomes an heir “reservataire” to a quarter of the estate.

GOOD TO KNOW:
If there is no heir in each family (or only beyond the 68th degree), the estate is recovered by the State and is said to be
“escheated

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NICE
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com

The fundamental importance of regulated agreements lies in their preventive role and protection of the social interest. These agreements make it possible to anticipate and prevent possible conflicts of interest, while guaranteeing the protection of the collective interest of the company.

Aware of this issue, the legislator has thus instituted a specific procedure, known as “regulated agreements” (“conventions réglementées”), allowing the corporate bodies to exercise rigorous control over these agreements. By definition, a regulated agreement is a contract concluded between an SAS (Simplified joint-stock company, “Société par actions simplifiée”) and its chairman, its other managers if applicable, or one of its shareholders with a fraction of the voting rights greater than 10% or, in the case of a shareholder company, the company controlling it within the meaning of Article L. 233-3, must be subject to the prior authorization of the board of directors.

The legal framework of the regulated agreement also applies when the contract is concluded between the SAS and one of the aforementioned persons, who is indirectly interested. So far, no definition has been given regarding the interested character mentioned in Article L225-38. However, the case law attempts to delimit this concept.

The specificity of regulated agreements is that they require a reasoned authorization from the board of directors, which must justify the interest of the agreement for the company. In this sense, neither the articles of association / by-laws (“statuts”) of the SAS nor the shareholders’ agreement may derogate from the rules of procedure applicable to regulated agreements.

Some conventions are said to be common and prohibited. Article L225-38 of the French Commercial Code provides that current agreements or agreements concluded under normal conditions are not subject to control by the board of directors and therefore do not require authorization. A routine operation is by definition an operation that is not exceptional, which must therefore be repeated at a certain frequency (Cass Com 11 March 2003 n°01-01-290: JurisData n° 2003-018566 Bull). Under Article L225-43 of the French Commercial Code, certain agreements are also directly prohibited. In particular, loans from the company and for the benefit of the chairman or a company manager (“dirigeant”). Consequently, the above-mentioned agreements are null and void and thus engage the civil or even criminal liability of the director who entered into them.

Regarding the control mechanism for regulated agreements, according to Article L. 225-40 of the French Commercial Code, the person directly or indirectly interested is required to inform the Board as soon as he or she becomes aware of an agreement to which Article L. 225-38 is applicable. It may not take part in the deliberations or the vote on the authorisation requested. Thus, in accordance with Article L.227-10 of the French Commercial Code, it is the responsibility of the statutory auditor to present to the partners a report on the agreement concluded between the director and the company. In SAS companies that have not appointed an auditor, it is up to the chairman to present this report.

Then, as specified in Article L225-41 of the French Commercial Code, the partners are free to approve or not the agreement. However, in both cases, the agreement will continue to have effect, but the person concerned will be liable in the event of damage caused to society.

Finally, Article 225-42 of the French Commercial Code refers to the nullity of agreements entered into without the prior authorization of the board of directors if they have had harmful consequences for the company. However, it is settled case law that this is a relative nullity. Indeed, the absence of automatic nullity remains as long as the nullity is not prosecuted is announced (Cass com 3 May 2000 JurisData n°2000-001913).

Nicolas BRAHIN Avocat
Master’s Degree in Banking and Financial Law / Université Panthéon-Sorbonne
Cabinet BRAHIN Avocats
Advokatfirma i NICE, Lawyers in NICE
Mob: 00 33 6 63 51 47 70
Email : nicolas.brahin@brahin-avocats.com
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
www.brahin-avocats.com

As of June 30th 2024 the MiCA EU Regulation 2023/1114 has entered in force in the matter of stablecoins (ARTs and EMTs) governed by its Title III and Title IV (Articles from 16 to 47 and from 48 to 58, respectively).

The MiCA Regulation adds the third category as well – “Other cryptoassets”, that are the final, miscellaneous category, where we find all the crypto-assets that don’t fit into the other two categories, such as Bitcoin, Ethereum and all cryptocurrencies whose value depends on nothing other than their own market price. Their regulation is yet to enter in force.

MiCA does not cover certain areas such as NFTs (except where they meet the criteria of financial instruments), DeFi services or more recent instruments such as the borrowing/lending of crypto-assets or staking¹. The European Commission has been mandated to study these issues and publish a report by December 2024, accompanied, if necessary, by a legislative proposal for an extension of the Regulation in accordance with its article 142.

The present article will assess the uneven base regime imposed by the MiCA regulation on stablecoins (I) and the additional requirements burdening the ARTs and EMTs, with an additional focus on “significant” crypto-assets (II), as well as introduce the base regime imposed on service providers that will enter in force by the end of the year 2024 (III).

Base regime imposed by MiCA

The MiCA Regulation creates a base regulatory regime mandatory for all issuers of the crypto-assets of any type. The main dispositions are yet to enter in force, however they are already fully applicable to the stablecoin issuers.

The primary obligation is to be incorporated as a legal entity in the publish a White Paper document on the issued crypto-assets and notify on its publication the competent regulatory authority. The Paper in question must describe the following:

– The company’s crypto-project and its main participants ;

– The blockchain mechanism used (proof of wok or proof of stake);

– The terms of the public offering;

– The key risks associated with the project and the crypto-assets;

– The rights and obligations attached to the crypto-assets.

The White Paper for obvious reasons is subjected to the transparency obligations, to non-compliance with which the issuer will be held liable in addition with other civil liabilities that exist under the national legislation. The authority may require to amend the White Paper, but there is no requirement of approval of the White Paper prior to the issue of the crypto-asset.

Issuers of ARTs and EMTs could not grant interest in any relation to the tokens, nor for providing related services, nor any renumerations or benefits related to the holding time of the ARTs or EMTs, including the services of receiving and transmitting orders on behalf of clients as well as the execution of orders on behalf of clients.

Finally, due to the transitory period imposed on the MiCA Regulation till 2026, the issuers must also consider other European (like Regulation DORA and national regulatory frameworks.

Regarding French regulatory framework, the AMF authority has issued a publication in 12th June 2023, confirmed on the 21st of June 2024, stating that the current national framework will be replaced on the 30th of December 2024 (for stablecoins on the 30th June 2024) regarding:

– Public offering and authorisation of cryptocurrencies trading and issue;

– Provision of the crypto-asset services by the service provides;

– Prevention of market abuse by the crypto-asset services.

Starting from 30th December, the European PSANs, under reserve of the transitory period established until 2026, won’t be able to exercise their services without an AMF approval, which will consequently become mandatory. To be covered by the transitory period, the PSAN must, by the 30th of December 2024, receive simple registration (“enregistrement simple”), reinforced one (“enregistrement renforcé”), or an optional AMF approval.

For the PSAN under the scope of the transitory period, such obligation will become mandatory on the 30th of June 2026, but their services during the transitory period must be restricted solely to the French public. Afterwards, the companies must receive an official MiCA approval to continue offering their services, even solely to the French public.*

Additional requirements on stablecoins imposed by MiCA

In line with the Considerations 8 and 9, the MiCA provides definitions for Electronic Money Tokens² (EMT) and Asset-referenced Tokens ³ (ART), so-called “stablecoins”.
EMTs are officially recognized as electronic money, the offering of which must be notified 40 days prior to the date of offering and could be redeemed at any moment on its monetary value.
It is important to underline that, under MiCA’s regulatory framework, the terms “stablecoin” and “Asset-backed Token (ABT)” will have no legal meaning in the EU as they fall under different regulatory frameworks.
The MiCA Regulation imposes additional requirements for the stablecoin issuers willing to exercise their commercial activity in the EU.
EMTs are issued at their face value (e.g.: 1 EMT = 1 EUR), in exchange for cash. What’s more, since EMTs are treated as electronic money, they represent a claim on the issuer, and can be redeemed free of charge for euros.
The Regulation has adopted a significantly more cautious approach towards the ART in comparison with EMT due to ART’s more volatile nature.

A. On the issuers of the ARTs

White paper:

White paper must contain the following information:

(a) issuer of the ART;

(b) the nature of the ART, associated rights and obligations, underlying technology;

(c) the contents of the public offering or its admission to trading;

(d) the associated risks and potential adverse impacts on “the climate and other environmental-related impacts of the mechanism used to the issuer of the e-money token,

(e) on the reserve of assets.

The White paper must also contain a statement from the issuer on its compliance with the MiCA Regulation, even though it is yet to fully enter into force, and a summary. The White paper must also include following statements addressed to the public:

1. The token may lose its value in part or in full;
2. The token may not always be transferable;
3. The token may not be liquid;
4. The token is not covered by investor compensation scheme under Directive 97/9/EC;
5. The token is not covered by deposit guarantee scheme under Directive 2014/49/EU.

Reserve of assets:

The issuers of the ARTs are legally obligated to constitute and maintain a certain reserve of assets distinct from issuer’s estate and from the other reserves constituted for other tokens.

The reserve must be proportional with the issuance and redemption of the tokens and must entail a stabilization mechanism for the ARTs, as well as a recovery plan.

The reserve asset could still be invested, but only in highly liquid financial instruments, or be held as a deposit with credit institutions.

The MiCA Regulation implies creation of the custody policy for the reserve of assets.

Own funds requirement is imposed on all issuers of the ARTs equal to at least the highest of the following options:

– -350 000 EUR, or

– 2% of the average (by end of calendar year) amount of the reserve assets, or

– Quarter of the fixed overheads of the preceding year.

Location and licensing:

To offer ARTs to the public in the EU or be admitted to trading on a crypto-platform, an issuer of ARTs must be established and authorized (licensed) in the European Union.

Reporting obligation:

Apart from significant tokens, for each ART with an issue value higher than 100 000 000 EUR, the issuer must report on a quarterly basis:

– Number of holders;

– Value of the ART and the size of the reserve;

– Average number of daily transactions⁴ and their average aggregate value during the quarter;

– The estimate of the average number of daily transactions and their average aggregate value associated with its usage in a single currency area.

The reporting obligation could be extended for the tokens below the stated value.

Complaint-handling procedures must be stablished by the issuer to cater the complaints of the holders, free of charge and in timely manner

Exemptions:

The regulatory regime on the ARTs provides certain partial exemptions depending on the type of offer (e.g., to qualified investors) or if the issuer is already regulated (e.g., as an EU credit institution).

In case of the offer to qualified investors there’s no necessary authorization to make a public offering, nor any restrictions imposed on the personality of the issuer under the Article 16 of the Regulation.

In case of an EU credit institution, it is automatically considered as competent, hence no authorization is required, but all the notification obligations still apply (issue of White Paper, notification within 90 days before the issue instead of 40).

Restriction on the issuance:

The issuer must stop issuing his ART if: the ART’s estimated quarterly average number is higher than a million transactions and daily average aggregate value of the transactions as a means of exchange within a single currency area is higher than 200 000 000 EUR.

Alternatively, the issuer must propose a plan to ensure that those markers are kept below the imposed limits, that could be modified by a competent authority.

If there are several issuers for the same ART, their market data is cumulative. The issue could be resumed only if the competent authority is presented with the evidence that the markers are kept below the imposed limits.

Transitory period and existing companies:

Finally, it is important to mention that the issuers of ARTs other than credit institutions that issued them in accordance with applicable law before 30th June 2024, may continue to do so until they are granted or refused an authorization pursuant to Article 21 of the MiCA Regulation, if they have applied for authorization before 30 July 2024.

Credit institutions that issued ARTs in accordance with applicable law before 30th June 2024, may continue to do so until their White Paper has been approved or has failed to be approved pursuant to Article 17 of the MiCA Regulation if they have notified their competent authority before 30th July 2024.

B. On the issuers of the EMTs

White paper:

White paper must contain the following information:

(a) issuer of the e-money token;

(b) the nature of the e-money token, associated rights and obligations, underlying technology;

(c) the contents of the public offering;

(d) the associated risks and potential adverse impacts on “the climate and other environmental-related impacts of the mechanism used to the issuer of the e-money token.

The White paper must also include two clear warnings addressed to the public:

1. The token is not covered by investor compensation scheme under Directive 97/9/EC;
2. The token is not covered by deposit guarantee scheme under Directive 2014/49/EU.

The White paper must also contain a statement from the issuer on its compliance with the MiCA Regulation, even though it is yet to fully enter into force, and a summary.

Permitted issuers:

The issuance of EMTs is only permitted for EU credit institutions and for e-money issuers already recognized as such and authorised to do so.

Token and investment requirements:

As stated before, the EMTs must amount to a claim on the issuer and be redeemable at par. In addition, the funds received by issuers of EMTs in exchange for EMTs, should they be invested, are restricted in the investement only to the assets denominated in the same currency as that referenced by the EMT.

C. On the criteria of “siginificance” and additional restrictions

MiCA regulation imposes additional restrictions and obligations on the issuers of the ARTs and the EMTs deemed as “significant”.

To be classified as significant, an ART or EMT of any kind must meet at least three of these requirements, as stated in the Article 43 of the Regulation:
Have more than 10 million holders;

– Market capitalization or size of reserve assets higher than 5 000 000 000 EUR;

– Average number of transactions per day for a defined period is higher than 2.5 million and their average aggregate value is higher than 500 000 000 EUR;

– Issuer is a provider of core platform services designated as a gatekeeper in accordance with the Digital Markets Regulation (EU Regulation 2022/195);

– Significance of activities of the issuer on an international scale, including use of the ART or EMT for payments and remittances;

– Interconnectedness of the ART or EMT or its issuer with the financial system;

– The same issuer issues at least one additional ART or EMT and provides at least one crypto-asset service.

The classification is to be annually assessed by the EBA based on described reporting. Any issuer may also voluntarily request that their ART or EMT will be classified as significant if he considers that the criteria are met.

The additional obligations are imposed in the matters of liquidity maintenance, recovery and redemption planning :

– Obligation to adopt remuneration policies for risk managment;

– Obligation to ensure that the ART and EMT could be held in custody by different crypto-asset providers authorised to do so on behalf of clients;

– Obligation to monitor the liquidity needs to meet redemption requests by establishing a relevant policy to ensure resilience of liquidity, even under stress;

– Obligation to conduct liquidy stress testing on all the proposed tokens.

The respect of the obligations in question must be ensured in accordance with the technical standards and guidelines issued by the EBA, ESMA and ECB, with first package issued on the 13th of June 2024 on the own funds, liquidity requirements, and recovery plans⁶, and the second one on the 4th of July 2024 on resilience, public disclosure and documentary drafting standards⁷.

Competent authorities will also be granted MiFID-like product intervention powers and a separate empowerment to require an issuer of an ART widely used as a medium of exchange, or of an EMT denominated in a non-EU currency, to introduce a minimum denomination or to limit the amount issued in order to decrease the use of such tokens.

In anticipation of CASP status

Under the MiCA Regulation, the crypto-asset service provider (CASP) is defined 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”.

The Article 59 of the MiCAR treats the matter of authorization by defining to two closed categories of the CASPs :

1. A legal person or other undertaking that has been specifically authorized as CASP by fulfilling the criteria of Articles 62 and 63 of the MiCAR;

2. A credit institution, central central securities depository, investment firm, market operator, electronic money institution, UCITS management company, or an alternative investment fund manager that is allowed to provide crypto-asset services in accordance with the Article 60 (on prior notification for the related activity).

The Article 62 defines the criteria and the application process to obtain the CASP authorization, most notably stating as requirements:

– Prudential monetary safeguards ;

– Proof of competence and good reputation for members of the management (notably an absence of criminal records and penalties related to anti-money laundering, counter-terrorist financing, fraud and professional liabilities);

– Description of reserve assets mechanisms and complaint-handling;

– Operating rules;

Etc.

Like the PSAN regime in France, this new status will establish a coherent mechanism for licensing and monitoring crypto-asset service providers within the European Union. Thus, the provision of the services listed in §2 of Article 62 of MiCA is conditional on obtaining compulsory CASP approval from the competent authority, which in France is the AMF.

CASP status authorizes service providers to offer their services within the European Union, in return for regulatory obligations.

The CASP status will enter in force with the remaining non-active provisions of the MiCA Regulation by the 30th of December 2024 If an entity legally providing crypto-asset services before 30th of December 2024 has not been authorised as a CASP by the end of the transition period applicable in the relevant Member State (including AMF in France), they must cease providing crypto-asset services before an authorisation as a CASP is issued under MiCA.

Therefore, an entity that has already been providing crypto-asset services before 30th of December 2024 and wishing to continue to do so under MiCA should apply for authorisation as a CASP as early as possible in order to ensure that the competent authorities have the time to assess their applications without disrupting their services.

staking¹ – process by which holders of certain cryptocurrencies immobilize a specific amount of their funds as a “pledge” in a wallet to participate in the operation of a blockchain network.

Electronic Money Tokens²– type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency (Paragraphe 1(7) of the Article 3 of Regulation 2023/1114);

Asset-referenced Tokens³– type of crypto-asset that is not an 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 (Paragraphe 1(6) of the Article 3 of Regulation 2023/1114)

Transactions⁴ (here) – any change of the natural or legal person entitled to the asset-referenced token as a result of the transfer of the asset-referenced token from one distributed ledger address or account to another;

The qualified investors⁵ (here) : 1) Entities which are required to be authorised or regulated to operate in the financial markets, such as credit institutions, investment funds, insurance companies, etc.; 2) National and regional governments and other bodies managing public debt, international institutions ; 3) other instituional investors, etc.

⁶ https://www.eba.europa.eu/publications-and-media/press-releases/eba-publishes-regulatory-products-under-markets-crypto-assets-regulation

⁷https://www.esma.europa.eu/press-news/esma-news/new-mica-rules-increase-transparency-retail-investors

Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NICE
Nicolas Brahin
Avocat
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Nicolas.brahin@brahin-avocats.com
www.brahin-avocats.com