Table of Contents
For years, companies working in the crypto-asset/Web3 sphere saw it as a given that at some point their token would be offered publicly and ultimately listed on an exchange. It could be because it had a certain utility, community function or simply to raise capital. It was also seen as a given that this process would happen quickly, without outside interference. However, under the Markets in Crypto-Assets Regulation (MiCA), the process is no longer as simple. This article gives a general overview of what to consider when issuing tokens in the EU in 2025 and beyond, primarily focusing on the treatment of utility tokens.
Determining the token class
MiCA and other financial regulations make a distinction between several primary types of tokens:
- Asset-referenced tokens – tokens that are designed to maintain stable value by referencing another value, right or their combination including one or more official currencies;
- Electronic money (or e-money) tokens – tokens that are designed to maintain stable value by referencing the value of one official currency;
- Utility tokens – tokens intended to provide access to a good or service supplied by its issuer;
- Security tokens (financial instruments) – tokens that broadly have qualities similar to those of transferable securities.
Each of the above token types have a different set of requirements towards notification of authorities, offering, listing, marketing and beyond. As such, it is important to determine under what exact definition the specific token qualifies. The guidance of the European regulator, the European Securities Markets Authority has stressed that hybrid qualifications are theoretically possible, but in such case the nature of the token as a financial instrument i.e. a security token must take precedent.
Determining the regulatory obligations
Once the token class is clear it is necessary to determine if the token is to be only offered to the public, also listed on an exchange and if there are further associated obligations related to the token launch.
Taking the example of utility tokens, to offer a utility token MiCA requires to draw up a compliant white paper (Article 6), notify the relevant regulatory body of the white paper (Article 8), publish the whitepaper (Article 9), and if marketing communications are used, then draft these marketing communications in compliance with the regulation (Articles 7 and 9).
However, the requirements may be avoided in certain situations. For example, MiCA explicitly states that it does not apply to crypto-assets offered for free, created automatically as a reward for the maintenance of the distributed ledger, where the offer concerns a utility token providing access to a good or service that exists or is in operation, or where the holder of the crypto-asset has the right to use it only in exchange for goods and services in a limited network of merchants with contractual arrangements with the offeror.
MiCA additionally clarifies that the requirements towards drawing up a compliant whitepaper, its notification, publishing and towards the publishing of the marketing communications do not apply if the offering is made to fewer than 150 natural or legal persons per Member State, or
over a period of 12 months, starting with the beginning of the offer, the total consideration of an offer to the public of a crypto-asset in the Union does not exceed EUR 1 000 000, or the offer is made solely to qualified investors.
Different types of tokens have different thresholds, for example with regard to asset-referenced tokens, an offering or admission to trading can, generally, be made only by an entity authorised by the regulator or a credit institution. However, the requirement is not valid if over a period of 12 months, calculated at the end of each calendar day, the average outstanding value of the asset-referenced token issued by an issuer never exceeds EUR 5 000 000, or the equivalent amount in another official currency, and the issuer is not linked to a network of other exempt issuers, or the offer to the public of the asset-referenced token is addressed solely to qualified investors and the asset-referenced token can only be held by such qualified investors.
Offering or listing of e-money tokens
Offering or listing of e-money tokens requires a similar, but slightly different procedure. E-money tokens can only be issued by authorised credit institutions or electronic money institutions that have notified a crypto-asset white paper to the competent authority and have published that crypto-asset white paper in accordance with MiCA. The same requirements may also be avoided if the offering is sufficiently small (the total business activities generate an average outstanding electronic money that does not exceed EUR 5 000 000).
Fulfilling of the regulatory requirements
Where the exact plans and obligations of a company have been determined, the regulations provide for detailed requirements towards fulfilling each obligation. In the case of utility tokens, the biggest obligation is the drafting of the whitepaper, which must provide information on the following: the offeror or the person seeking admission to trading, the issuer, if different from the offeror or person seeking admission to trading, the operator of the trading platform in cases where it draws up the crypto-asset white paper, the crypto-asset project, the offer to the public of the crypto-asset or its admission to trading, the crypto-asset, the rights and obligations attached to the crypto-asset, the underlying technology, the risks and the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue the crypto-asset.
The white paper must fulfil other requirements, such as being “fair, clear and not misleading”. It must not contain material omissions and be presented in concise and comprehensive form. It must contain disclaimers, certain statements and more. Similar rules are applicable to marketing communications.
What steps stand between filing and publication?
Once the documents package is ready, the potential issuer submits it to the regulatory body, which, in the case of Estonia, is the Finantsinspektsioon (the FSA). The notification procedure is conducted similarly to other regulatory applications. For most tokens, a state fee will need to be paid. Thereafter, the FSA conducts an initial review of the documents. If it finds deficiencies, it notifies the issuer and gives an opportunity to correct the issues. Once satisfied, the FSA notifies the European regulator ESMA of the offering. The formal notification occurs at least 20 working days before the date of publication of the whitepaper.
The obligations that the issuers of other token types must comply with are more numerous and are therefore not reviewed here. Almost every decision in issuing or listing a token results in regulatory consequences. As such, it is paramount for a prospective issuer to be mindful of the exact classification of their tokens and their associated compliance requirements.
