MiCA's Obligation to Develop a Recovery Plan

The Markets in Crypto-Assets Regulation (MiCA) marks a significant shift in the regulation of the crypto sector. In particular, MiCA imposes a stringent regulatory regime on issuers of asset-referenced tokens and e-money tokens. This article discusses the obligation of these issuers to prepare a recovery plan.

Creation of a Recovery Plan

Asset-referenced tokens are a type of crypto-asset that purport to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies. Issuers of asset-referenced tokens are required to constitute and at all times maintain a reserve of assets backing their asset-referenced tokens. 

Issuers of these tokens need to plan for scenarios where the requirements applicable to the reserve of assets might not be met. This includes temporary unbalances in the reserve of assets caused by the fulfillment of redemption requests. For such contingencies, the recovery plan must provide measures that facilitate the restoration of the reserve of assets.

E-money tokens are similar to asset-referenced tokens, except that they reference the value of only one official currency. E-money tokens can only be issued by authorized credit institutions or e-money institutions. Issuers of e-money tokens also have the responsibility to create a recovery plan. This ensures that the rights of e-money token holders are protected when issuers are unable to comply with their obligations.

Content of the Recovery Plan

The recovery plan should incorporate appropriate conditions and procedures to ensure swift implementation of recovery measures. The plan should include:

• the preservation of the issuer's services related to the asset-referenced token (or e-money token),
• the timely recovery of operations, and
• the fulfillment of the issuer's obligations in events posing a significant risk of disrupting operations. 

Moreover, the plan should offer a comprehensive array of recovery options. These can range from the suspension or quantitative limitation of redemptions of tokens to imposing liquidity fees on those redemptions. To protect the interests of token holders and financial stability, a temporary suspension of token redemption can also be mandated by the competent authority.

Deadline for Submission to the Competent Authority

Issuers of asset-referenced tokens are required to submit the recovery plan to the competent authority within six months of the date of authorization or approval of the crypto-asset white paper. For e-money token issuers, the six-month period commences from the date of the offer to the public or admission to trading. Issuers must regularly review and update the recovery plan to ensure its relevance.

Conclusion

In conclusion, the introduction of MiCA underscores the European Union's commitment to safeguarding the interests of crypto-asset stakeholders. By mandating the creation of a recovery plan, MiCA ensures that issuers are better prepared to tackle unforeseen challenges, thereby strengthening the resilience and stability of the crypto-asset market. It is crucial for issuers to understand these obligations and act in due diligence. If you are seeking assistance in formulating a recovery plan, as a law firm specializing in crypto law, we are well-equipped and ready to assist you.