Response to consultation on RTS on procedure and timeframe to adjust its own funds requirements for issuers of significant asset-referenced tokens or of e-money tokens under MiCAR
Question 1. Is the procedure clear and the timelines for the issuer to submit the plan reasonable?
We believe that there should be a specifically designated time period of 7 to 14 days, between Competent Authority notification and the 20 day period to produce a plan, for consultation and negotiation between the Competent Authority and the issuer. This would provide an opportunity to be heard and to align expectations. We also propose that the Competent Authority should have broader flexibility than currently proposed with regard to the time to increase the levels of own funds.
Question 2. Are the timeframes for issuers to adjust to higher own funds requirements feasible?
Other than in exigent circumstances implicating systemic risk, or risks to broader financial stability, the time to adjust the own funds requirement should not have a specific limit of 3-months or less. These timeframes should be more flexible and the Competent Authority should be explicitly directed to consider the potential impact of such an increase on token holders and also to the availability of any necessary changes in counterparties to the issuer.
Further, depending on the size of the issuer and its organizational/corporate structure, a 50% increase, or more, in own-funds, could require Board approval for a public or private offering necessary to raise new funds.
Question 3. During the period when own funds need to be increased by the issuer, should there be more restrictions on the issuer to ensure timely implementation of the additional own funds’ requirements, for example banning the issuance of further tokens?
No. Such proscriptive restrictions would preclude the Competent Authority from full consideration of issue-specific or unforeseeable financial and market conditions that could meaningfully impact operational and liquidity risk to issuers and counterparties. Further, such a proscriptive approach may increase or exacerbate run-risk and impair existing token holders and increase the risks of contagion to other issuers and tokens.