Issuing Stablecoins as an EMI Holder: Legal Considerations

Question

As an EMI holder can I issue stablecoins?

Executive Summary

In response to the question about the ability of an EMI holder to issue stablecoins, the following summary highlights the key directives based on MiCA regulations:

  • Stablecoin Issuance by EMIs: An Electronic Money Institution (EMI) within the EU can issue stablecoins as ‘e-money tokens’, provided they reference a single official currency and are designed to maintain a stable value.
  • Authorization and Compliance: The EMI must be authorized as a credit or electronic money institution and comply with MiCA’s procedures, including the creation and notification of a comprehensive crypto-asset white paper 20 working days prior to its publication.
  • Simplified Authorization Path: Transitional provisions in MiCA might allow EMIs with existing national authorization a streamlined process for crypto-asset service provision.
  • Regulatory Adherence: To legally issue stablecoins, EMIs must follow all MiCA procedural requirements, including preparing the white paper, notification, and adherence to legal stipulations for authorization under both MiCA and national laws where applicable.

This summary establishes the conditions under which an EMI holder can engage in stablecoin issuance within the regulatory scope of MiCA.

Assumptions

  • EMI License Holder: Assume the user holds a valid EMI license within the European Union, subject to MiCA regulations.
  • Nature of Stablecoin: Assume that the stablecoin they intend to issue is pegged one-to-one with a fiat currency, such as the Euro.
  • Intent of Issuance: The intention behind issuing stablecoins is to provide a digital payment instrument, not to offer investment opportunities.
  • Regulatory Scope: It is assumed that the user’s EMI licensing terms are standard and that the activities they are licensed for do not already exclude issuing financial instruments that could include stablecoins.

Legal trace

Understanding E-Money Tokens and EMI’s Role

’crypto-asset’ means a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology; Article 3(5)

Crypto-assets encompass a wide array of digital assets, including the kind of stablecoins the user intends to issue. The broad definition implies that these could potentially fall under the regulatory ambit of MiCA.

‘electronic money token’ or ‘e-money token’ means a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency; Article 3(7)

Under MiCA, an EMI can issue stablecoins if they are designed to maintain a stable value by referencing a single official currency, as they would fall under the category of ‘e-money tokens’.

Issuance Possibilities Under MiCA

A person shall not make an offer to the public or seek the admission to trading of an e-money token, within the Union, unless that person is the issuer of such e-money token and: (a) is authorised as a credit institution or as an electronic money institution; and (b) has notified a crypto-asset white paper to the competent authority and has published that crypto-asset white paper in accordance with Article 51. Article 48(1)

The directive suggests that EMIs are authorized to issue e-money tokens. For an EMI holder to issue stablecoins legally, they must adhere to necessary notification and publication duties set forth in MiCA.

Regulatory Procedural Requirements

A crypto-asset white paper for an e-money token shall contain […] concise and comprehensible information […] and issuers […] shall notify their crypto-asset white paper to their competent authority at least 20 working days before the date of their publication. Article 51.1 and Article 51.11

EMIs intending to issue stablecoins need to prepare a comprehensive and clear white paper. They must notify the competent authority of their intention ahead of the publication, ensuring regulatory due diligence is met.

Transitional Measures and EMI Licensing

By way of derogation from Articles 62 and 63, Member States may apply a simplified procedure for applications for an authorisation […] Article 143(6)

Transitional measures within MiCA may offer a simplified authorization process for EMIs already authorized under national law to provide crypto-asset services.

Conclusions for the EMI Issuing Stablecoins

As per the Markets in Crypto-Assets (MiCA) regulation and the analysis of relevant articles, an Electronic Money Institution (EMI) holder within the European Union can issue stablecoins, provided:

  1. The stablecoins are classified as ‘e-money tokens’ by referencing one official currency and maintaining a stable value.
  2. The EMI holder is properly authorized either under MiCA or under established national regulatory frameworks that recognize the entity as eligible to provide crypto-asset services.
  3. The EMI holder complies with the procedural requirements of MiCA, including preparing and notifying the necessary crypto-asset white paper.

Any EMI holder looking to issue stablecoins should ensure compliance with the detailed procedural framework set out in MiCA, including notification and white paper requirements, and should assess their eligibility and necessary steps for authorization under the current transitional measures. If they meet these requirements and adhere to the legal stipulations, they can issue e-money tokens that qualify as stablecoins.