The European Union

For a European entrepreneur, RWA regulation first looks like a labyrinth. MiCA, MiFID II, the pilot regime, the prospectus, DORA, the anti-money laundering package, and behind each acronym hundreds of pages, delegated acts and ESMA guidelines. Yet this labyrinth follows a simple logic. Everything starts from a preliminary question, the legal qualification of the token. Once that question is settled, the applicable regime follows almost mechanically.

The preliminary question, qualifying the token

In the absence of a legal category specific to RWA, European law applies to each token the regime that corresponds to its economic and legal nature, according to a principle regulators sum up in a formula. Same activity, same risks, same rules. A token that represents a share is a share, and falls under the law of financial securities, whatever technology records it.

The first question is therefore always the same. Is the token a financial instrument within the meaning of the MiFID II directive? If so, it falls under the whole of financial markets law, and the MiCA regulation does not apply. If not, it is a crypto-asset, and MiCA applies, depending on whether the token aims to maintain a stable value by reference to an official currency, to a basket of assets, or to neither. At the end of 2024 ESMA published guidelines to help with this qualification, which detail the criteria for recognising a financial instrument in tokenised form.