Response to consultation on Guidelines on redemption plans under MiCAR
Q1. Do you consider that the scope of the GL on redemption plans is sufficiently clear and takes into account the differences regarding the obligation to hold a reserve of assets set out in Regulation (EU) 2023/1114 applicable to the different types of ART or EMT issuers?
Please note our cover note, executive summary and key themes which precede the answers to the specific questions have been attached in our PDF responsne which accompanies this submission.
Yes, GDF believes the scope is clear and the obligations for reserve assets are appropriate for different types of ART and EMT issuers. We appreciate the emphasis that the EBA placed on proportionality within the consultation. GDF also welcomes in particular that NCAs are encouraged to take note of risk profile and that the EBA encourages reviews of redemption plans to take into consideration the classification of the Asset Referenced Tokens (ARTs) or E-Money Tokens (EMTs) as ‘significant’ in accordance with MiCAR Articles 43 and 44, and 56 and 57. GDF believe this to be a proportionate approach and welcome the specificity within these articles with regards to the timescales and process of notification of significance from the EBA, as well as cooperation on these matters with member states.
Q2. Do you consider that the GL on redemption plans are sufficiently clear and comprehensive and that they cover all aspects of the mandate?
Yes, GDF believes the GL is clear and comprehensive. We would note however that the two-month implementation period following translation into all official languages is quite a tight deadline to comply with. We believe that it may be more proportionate to also include a grace period for compliance within which firms would not be penalised but could instead receive a written warning as they prepare to comply.
Additionally, while GDF welcomes the cost benefit analysis provided within the guidelines, we believe it would be beneficial ahead of implementation to have further public/private sector dialogue around cost of implementation (and particularly within the two-month implementation period.) As the market prepares to comply with the guidelines members would welcome the opportunity to further discuss with authorities in particular the contractual costs with third parties as well as pooled costs of issuance in accordance with the guidelines as well as any challenges that may arise in preparation for implementation.
Q3. Do you consider that the redemption process as described herein provides adequate operational guidance to token holders about the actions and steps relating to the redemption claim?
GDF supports the Consultation’s view that it is critical for token holders to receive adequate operational guidance for the redemption process. However, we believe additional guidance on ‘What Good Looks Like’, beyond what is set out on page 26 of the Consultation would be beneficial as firms prepare to comply with requirements. This is particularly beneficial in the case of firms which may not previously have been regulated, or smaller market participants. This type of guidance would support a level playing field, as well as the EBA’s aims to be proportionate in their implementation of redemption plan requirements. For example, for other pieces of legislation (e.g., registration, licensing, etc.), industry has found it beneficial to receive specific guidance and feedback from the public sector. This type of transparent dialogue supports best practice across industry.
This would be specifically beneficial for providing operational guidance to token holders and it may be beneficial for authorities to provide additional guidance and specificity to the market in order to develop a standardised approach. GDF would be happy to convene a public/private sector discussion to share views and further discuss current market approaches and standard methods for Communication Plans. We firmly believe in the importance of high-standards and a level playing field for market participants. Given this, we would welcome further dialogue between industry and the EBA in order to provide greater specificity on this matter to the wider ecosystem.
Q.4 Do you consider that the information to be contained in the draft public notice is adequate and covers the necessary information to be conveyed to the token holders and for a sound redemption process?
Yes, GDF believes this contains the appropriate and adequate information at a high level but as noted under Question n. 3 above, greater detail could be provided on ‘What Good Looks Like’ to support market participants in their preparation.
Q5.1 Do you consider that the aspects to be assessed by the competent authority for purposes of assessing whether the issuer is unable or likely to be unable to fulfil its obligations under Regulation (EU) 2023/1114 envisaged in the Guidelines appropriately complement those set out in Article 47(1) of Regulation (EU) 2023/1114?
Yes, GDF believes the Guidelines provide an appropriate complement to MiCAR and welcome the additional specificity.
Q5.2 Do you agree that in case of credit institutions and the other entities subject to Directive 2014/59/EU or of central counterparties subject to Regulation (EU) 2021/23, the competent authority should not trigger the redemption plan without prior consultation and coordination with the relevant prudential or resolution competent authorities under that Directive or Regulation, in case of commencement of crisis prevention measures or crisis management measures under such sectoral acts?
Yes, GDF believes that this would be appropriate, and believe that prior consultation with prudential or redemption competent authorities would mitigate any unintended financial stability risks and would support a more coordinated and orderly approach to redemption.