Trade Associations Raise Concerns About MiCA/PSR Misalignment

November 14, 2023
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Trade associations have warned that the EU’s proposed Payment Services Regulation (PSR) and updated directive (PSD3) clash with requirements for e-money issuers in the Markets in Crypto-Assets (MiCA) regulation.

Trade associations have warned that the EU’s proposed Payment Services Regulation (PSR) and updated directive (PSD3) clash with requirements for e-money issuers in the Markets in Crypto-Assets (MiCA) regulation.

The Digital Currencies Governance Group (DCGG) and the Electronic Money Association (EMA) have raised concerns about the new PSR potentially causing arbitrage with compliance requirements in MiCA.

While MiCA is due to become enforceable next year, the PSR was proposed in June this year and still needs to be negotiated by the EU’s co-legislators, the European Parliament and the Council of the EU.

In feedback submitted to the European Commission, the DCCG warned in particular of a discrepancy between Article 30 of the PSR and MiCA.

The charging of fees is allowed for all e-money institutions (EMIs) through the PSR, but that is not the case for e-money and asset-referenced token issuers under MiCA. However, under MiCA these same issuers should also be authorised as EMIs as per PSD3/PSR.

“We are concerned that this is very discriminatory toward e-money token (EMT) issuers and does not abide by the principle of technological neutrality,” said the DCCG.

The DCCG also pointed out that the original commission proposal on MiCA explicitly allowed for EMT issuers to charge redemption fees, as long as the conditions are prominently stated in the whitepaper of the token.

“We see it as necessary to align both regimes and the rights stemming from them, including when it comes to redemption fees,” the DCCG added.

It is also necessary to “allow for redemption fees to be charged in a proportionate manner, related to the costs incurred by the service provided by EMT issuers”, the association said.

According to the DCCG, allowing EMT issuers to charge redemption fees not only stimulates the development of a more vibrant EU crypto-asset and stablecoin industry, but also treats them fairly in relation to their traditional finance counterparts.

“We therefore urge the commission to seek alignment of its proposed regulation and its proportionate rules to what is currently outlined in MiCA, either through coordination with the European Supervisory Authorities’ work on Level II measures, or through a revision of the Level I text,” said the DCCG.

EMA troubled by Article 54(a)

The EMA, meanwhile, has warned that the PSR provision that allows e-money institutions to safeguard funds at central banks risks a regulatory discrepancy with Article 54 of MiCA.

Article 54(a) of MiCA requires EMT issuers to deposit at least 30 percent of funds received in exchange of issued EMTs in separate accounts in credit institutions.

According to the EMA, the broadened scope for safeguarding of customer funds must be read across to this MiCA provision to avoid an inconsistency between traditional e-money and EMTs.

This, the EMA has argued, undermines technology neutrality, as holders of EMTs will not benefit from the additional mitigation of safeguarding-related risks.

EBA chimes in

The two trade associations are not the only ones raising concerns about possible arbitrage with the MiCA and payments regulation.

At an event in September, officials at the National Bank of Belgium (NBB) and the European Banking Authority (EBA) raised “serious cohesion” issues between MiCA and the PSR’s predecessor.

An EBA official also suggested that guidance on how to navigate both is likely to be needed.

This week, the trade associations may be in luck. The European Parliament is due to publish its first report on the PSR imminently, and could have laid down amendments to iron out these issues.

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