In an effect to promote transparency and regulatory compliance in the crypto-assets market, the EU regulator EBA issued regulatory guidance on governance, remuneration and conflicts of interest under the markets in crypto-assets regulation framework on Thursday. Photo: Shutterstock

In an effect to promote transparency and regulatory compliance in the crypto-assets market, the EU regulator EBA issued regulatory guidance on governance, remuneration and conflicts of interest under the markets in crypto-assets regulation framework on Thursday. Photo: Shutterstock

The European Banking Authority has published regulatory standards under the markets in crypto-assets regulation, known as Mica, outlining governance arrangements, remuneration policies and conflict of interest standards, aiming to establish robust frameworks for crypto-market participants and foster confidence in the sector.

The European Banking Authority has unveiled a series of regulatory standards under the markets in crypto-assets regulation (Mica), providing guidance on governance, remuneration and conflicts of interest for issuers of asset-referenced tokens (ARTs), signalling a concerted effort to strengthen oversight and enhance market transparency in the crypto-assets market. The guidance was on Thursday 6 June 2024.

Governance arrangements

The on the minimum content of governance arrangements for issuers of ARTs provide detailed governance provisions as mandated by Mica, considering the principle of proportionality. They clarify the tasks, responsibilities and organisation of the management body and the organisational arrangements of issuers, ensuring sound risk management across all three lines of defence.

Referring to article 34(13) of Mica, the banking authority highlighted its mandate, in collaboration with the European Securities and Markets Authority (Esma) and the European Central Bank (ECB), to issue guidelines specifying the minimum governance requirements.

Remuneration policy

The EBA also the final draft regulatory technical standards (RTS) on the minimum content of governance arrangements related to remuneration policies. These RTS apply to issuers of significant ARTs and electronic money institutions issuing significant e-money tokens (EMTs), and, where applicable, to issuers of non-significant EMTs under article 45(1) of Mica.

The RTS aim to ensure remuneration policies promote sound and effective risk management, avoid creating incentives to reduce risk standards, and maintain cross-sectoral consistency, said the EBA. This regulatory framework for remuneration policies is intended to achieve similar regulatory objectives to those established for investment firms. The development of these RTS was in accordance with article 45(7) of Mica, which mandates the EBA, in cooperation with Esma, to detail the governance processes and essential elements of remuneration policies.

Conflicts of interest

Additionally, the EBA the final draft RTS on conflicts of interest for issuers of ARTs. These standards specify the requirements for policies and procedures to manage conflicts of interest. Issuers of ARTs are required to implement and maintain effective conflicts of interest policies and procedures to identify, prevent, manage and disclose conflicts of interest. Particular attention should be paid to conflicts that may arise concerning the reserve of assets.

For issuers within a group, the conflicts of interest policies must consider the structure and business activities of other entities within the group. The development of these RTS followed article 32(5) of Mica, which mandates the EBA to define the conflicts of interest policy requirements and disclosure methodology, developed in close cooperation with Esma.

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