EU Digital Finance Package Towards a cryptoassets regime

EU Digital Finance Package: Towards a crypto-assets regime

Adan Who are we? Adan is an industry body that brings together and represents digital asset and blockchain professionals in France and Europe. Our 45 members cover a wide range of activities, including market makers, custody providers, payment service providers, investment management, analysis tools, events and marketing, and security. We are dedicated to For all the companies that are interested in crypto-assets and are targeting French / EU market. Vision We believe that digital assets represent a transformational shift in finance and economics. Crypto-asset technologies challenge centuries-old foundations of economics and monetary theory and offer the potential to create a new social contract built on the principles of inclusion and openness. Mission Our mission is to be a pragmatic voice for the French and European digital asset industry, contributing to its growth and development through constructive dialogue and education. Adan into figures Born in January 2020 45+ members 3 employees 2 Committees (VASP & European Affairs) 8 internal working groups 12 documents drafted: 5 reports, 6 consultation responses, a letter to MPs 5 surveys conducted 5 events organised 11 institutions welcome Adan in regular meetings 2

Overview What is the EU proposed framework for crypto-assets? 3

Regulations Which framework(s) apply to crypto-assets? Two foundational texts to regulate crypto-assets in the EU. . . Markets in crypto-assets regulation Pilot regime for DLT market infrastructures “Mi. CA” “PRR” . . . but one common pillar: “prohibition, unless!” 4

Scope Who and what is on the EU radar? General principle : regulate market participants & not assets Crypto-asset market participants. . . 3 main targets ● Crypto-assets issuers (excluding security tokens): the primary crypto-assets market. ● Crypto-Assets Service Providers (CASPs): the secondary cryptoasset market and related supporting services e. g multilateral trading platforms, OTC exchanges, custodians. ● Trading and post-trading infrastructures for security tokens (MTF, CSD and SSS) … whatever the crypto-asset Crypto-asset = digital representation of value or rights which may be transferred and stored electronically, using DLT or similar technology � Includes: ● Utility tokens Never explicitly mentioned in the EU proposals ● Cryptocurrencies ● Stablecoins ● Security tokens � Excludes: e-money, deposits, structured deposits and securitisation (deemed not being crypto-assets) 5

Scope Who and what is on the EU radar? Exceptions: specific rules apply to security tokens and stablecoins Security tokens: ● fall under financial regulations Crypto-assets ● cannot be listed by CASPs Cryptocurrencies ● can benefit from the Pilot Regime (with some restrictions) Security tokens Asset-referenced tokens and e-money tokens: ● strong issuance, maintenance & listing rules ● e-money tokens are banned from the EU if rules are not followed ● stronger rules when “significant” Utility tokens on-blockchain securities Assetreferenced tokens e-Money tokens fiat-backed stablecoins other stablecoins 6

Rules Which framework(s) apply to crypto-assets? The regulations impose different levels of obligations Issuers of crypto-assets Crypto-Asset Service Providers Light Strong utility tokens cryptocurrencies asset-referenced tokens significant assetreferenced tokens security tokens e-Money tokens significant e-Money tokens Very strong! 7

Shortcomings & Proposals 8

Shortcomings & Proposals Shortcomings Challenge for De. Fi and other decentralized use cases Ban on decentralized stablecoins and decentralized representations of other crypto-assets, unadapted issuance obligations Risks to public blockchains Mi. CA and PRR may suggest that “DLT” can only be a private/proprietary technology. Insufficient proportionality Proportionality rules on CASPs and crypto-asset issuers are insufficient to allow for continuous innovation in Europe Adan’s preliminary proposals Remove restrictions on the listing of crypto-assets on trading platforms, change the scope of stablecoins rules, consider the critical issue of blockchains interoperability, allow for the payment of interests on stablecoins, remove the ban on e-money tokens which are not a claim on the issuer Redraft articles in Mi. CA and PRR that could exclude use cases that are deployed on public networks Increase thresholds for exemptions, adapt the requirements progressively based on the size and maturity of actors, Significantly decrease the regulatory burden on issuers of e-money tokens

Shortcomings & Proposals Shortcomings Unequal opportunities between incumbents and newcomers Stronger rules apply to newcomers. Adan’s preliminary proposals Reduce the waivers granted to incumbent actors, do not limit the emoney token issuance & pilot regime to financial regulated actors, restore equal opportunities to all, ensure the application of some obligations thanks to guarantees brought by traditional actors Operational issues Some details of the regulation are providing for operational obligations that are not in line with the market practice and not justified from a security or risk standpoint. Redraft articles in Mi. CA and PRR that raise such issues.

Questions? 11

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