MiCAR Series: Week 6 – Complying with the EBA’s final governance guidelines for asset-referenced tokens

MiCAR came into full effect for ARTs on 30 June 2024, one year after its initial publication in June 2023. ARTs are a type of crypto asset (digital representations of value which can be stored or transferred electronically) and the MiCAR aims to ensure safe and regulated access to the EU market for crypto assets. The EBA issued its final guidelines on 6 June 2024 which specify the governance provisions that issuers of ARTS must comply with, considering the proportionality principle. The governance framework is designed to ensure a sound management of all risks associated with the activities of issuers of ARTs such as operational risks, including fraud, cyber and compliance risks.

These guidelines are applicable three months after the date of publication on the EBA’s website and are relevant to the Central Bank of Ireland (CBI) and issuers of ARTs (specifically the management body) as both share the onus for compliance. 

Both entities must regard the principle of proportionality when applying and implementing these guidelines. This principle ensures that all action taken by European Union institutions are fair and relative to the specific institute it applies to. The EU states that measures must be ‘suitable, necessary and must not impose a burden that is excessive in relation to the objective sought to be achieved’. As a result, both entities should consider several factors to ensure the appropriate implementation of the governance requirements. These factors include the size of the issuer, the volume of ARTs issued, the number of holders of the ART and the complexity of the ART, among other considerations outlined in the paper.

The primary aim of the final guidelines is to ensure that proper governance arrangements, specifically robust risk strategies, are implemented by issuers of ARTs. Additionally, the guidelines seek to provide appropriate protection for both consumers and investors. The guidelines state that all issuers of ARTs should have an effective and permanent compliance function, while taking into consideration the proportionality principle. Not all are required to have an internal audit and risk management function however these entities are still required to have respective policies and procedures in place.

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