Response to consultation paper on draft Technical Standards on information for authorisation

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Question 1. Do you consider that letter (a) of Article 3(2) captures in a clear and realistic manner all necessary requirements of the offer to the public or admission to trading of the asset-referenced tokens, including the mechanism for the issuance, redemption and distri-bution of the asset-referenced tokens?

We believe that Art 3(2) is comprehensive in capturing the core requirements.
Having said that, we would make the following comment with respect to Article 3(2) of
the RTS. Article 3(2)(c) suggests that applicants need to provide extensive information
relating to other entities in their group, in particular looking at overall strategy, customers
and other information. We do not believe this information is strictly necessary to enable a
regulator to authorise an ART and therefore would suggest that Art 3(2)(c) is reduced in
scope to ensure that the requirements in relation to the applicant’s group are clear and
require disclosure of information relating to the group only to the extent necessary for the
applicant’s application to be assessed.

Question n. 2: Do you consider that the information requirements about the internal con-trol framework are sufficiently clear and exhaustive?

No further comments.

Question n. 3: Do you consider that Article 6(4) captures in a clear and correct manner all necessary information about the functioning of proprietary DLT or other similar technology where ARTs are issued, transferred and stored and that is operated by the issuer or a third-party operator acting on the issuer’s behalf?

No further comments.

Question n. 4: Do you consider that the information requirements about the policies and procedures on the composition and management of the reserve of assets, as well as on the custody and investment of the reserve of assets are sufficiently clear and comprehensive?

No further comments.

Question n. 5: Do you agree with the general content and level of detail of the information to be contained in the application?

Generally we agree with the form and content requirements for the application as set out
in the RTS and the ITS, with the following specific comments:
● It remains unclear to us how the authorisation concept for ART issuers works, in
terms of what it attaches to. Primarily our question is if the authorisation is
granted in respect of the ART that is being applied for, or if the issuer itself is being
authorised to issue the ART in question. We would request that the application
process provides some clarity in respect of this, to reflect in particular the point in
the fourth paragraph of Art 16(1) of MiCAR that allows an issuer to engage others
to issue an ART that has been authorised, which presupposes that it is the issuer
that is authorised, but in respect of a particular ART.
● We would request that the concept of allowing “other undertakings” (that are not
legal entities - see Art 16(1)(a)) to be authorised to issue ARTs is reflected more
clearly within the application requirements in the RTS and ITS. For example, an
undertaking that isn’t a legal person will not have a legal entity identifier under Art
2(1)(d) of the RTS, nor would they be likely to have an accounting reference date
(under Art 2(1)(k). We would suggest that the requirements in the RTS and ITS be
considered alongside the concept of allowing “other undertakings” to be
applicants here, so that the requirements for those entities are clear.
● Related to the point above, we would suggest that the requirement in Art 2(1)(j) to
obtain a legal opinion around the protections offered by the structure adopted is
extremely onerous and will be unlikely to be capable of being met in practice, given
the difficulties of being able to obtain an unambiguous legal opinion on points such
as these from a law firm, and considering the diversity of legal structures available
across the Union giving rise to a lack of clarity around what the baseline
requirement will be. We would suggest further clarity is given here in relation to
this requirement, that takes into account that absolute legal comfort will be unlikely
to be achievable here. We believe this is an important point to enable the EU to
deliver on the promise of potentially allowing innovative entity structures to
develop within the crypto assets industry
● Art 4(5)(iv) of the RTS requires evidence of the own-funds requirement being paid
up, or held in escrow with an appropriate credit institution. Generally our
experience is that start-up issuers who have to engage in getting regulatory
authorisation will not be able to raise the appropriate funds to meet the own-funds
requirement unless and until they receive authorisation to carry on the activities
they propose. We would therefore suggest that Art 4(5)(iv) take into account that
firms may not have the appropriate funds in place prior to authorisation, but may
have firm commitments from investors or group companies to fund the own-funds
requirement when authorisation is received - and authorisation may be granted
with a restriction on issuance until evidence has been given to the regulator that
the funds are in place.
● Article 4(6) of the RTS should take into account that some applicants may not have
three years of prior financial statements (due to them being early stage
businesses), and that will not be a barrier to applicants.

Question n. 6: Do you consider that Annex II to the ITS is sufficiently clear in the identi-fication of the information requested for each field and sub-field?

Yes, we would agree that the ITS is sufficiently clear, although we would anticipate
regulators providing guidance at member state level of how they would expect certain
elements of the application to be delivered, to supplement the RTS and the ITS.
Currently the ITS fits well with the requirements set out in the RTS, and if the RTS is
changed in light of comments received, we anticipate the ITS being appropriately updated
to reflect those changes.

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