Token redemption in case of issuer crisis: EBA publishes final Guidelines

The European Banking Authority (EBA) has released final Guidelines on the orderly redemption of token holders in case of an issuer’s crisis. These Guidelines are addressed to authorities under Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets (MiCAR) and apply to issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs).

The Guidelines outline what a redemption plan must include. It contains:

• overing asset liquidation strategies,
• critical activity mapping,
• redemption claim details,
• the redemption process,
• triggers for activating the plan by authorities.

Feedback from public consultations led to some clarifications to improve understanding and flexibility in applying the guidance, particularly for EMT issuers.

According to Article 47(5) of MiCAR, each ART and EMT issuer must develop a redemption plan to ensure orderly token redemptions when the authority deems the issuer unable to fulfill obligations. The Guidelines specify the required content and review frequency of these plans, along with implementation triggers. 

Importantly, provisions related to asset reserves do not apply to credit institutions issuing EMTs or to e-money institutions (EMIs) issuing insignificant EMTs unless required by the authority.

The guidelines structure

The Guidelines are structured into four main sections:

• Proportionality Principle: Details the necessary level of detail for the redemption plan and its periodic review.
• General Principles: Addresses equitable treatment of token holders, covering issues such as suspension of claims, liquidation proceeds allocation, and strategies for maximizing asset liquidation returns.
• Content of the Redemption Plan: Focuses on governance, responsible parties, identification of critical activities, and a communication plan for informing stakeholders when the plan is activated.
• Triggers for the Redemption Plan: Identifies conditions under which the authority might find an issuer unable to fulfill obligations and specifies coordination with resolution plans applicable to credit institutions.

When will the Guidelines come into force?

The Guidelines emphasize the need for collaboration between the MiCAR competent authority and relevant prudential and resolution authorities to ensure effective crisis management.

These Guidelines will be translated into all official EU languages and published on the EBA website. Competent authorities must report compliance within two months of the translations’ publication, with the Guidelines taking effect two months thereafter.

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