Berlin

The second roundtable in the series was held on April 23rd 2024 in Berlin, in partnership with siedler legal, thinkBLOCKtank, and Validvent in collaboration with Berlin Partner, the EUBOF, and INATBA.

The event featured a keynote from Joachim Schwerin, Principal Economist at the European Commission, and included expert contributions from Joanna Rindell (World of Women) on NFTs, Luiza Castro (FiO Legal) and Alireza Siadat (Annerton) on grandfathering issues, Dr. Max Bernt (Taxbit) on crypto-asset classification, Daniel Resas on frontend providers for DeFi, Tiana Whitehouse (SWOT Team Consulting GmbH) on reverse solicitation, and Jörn Erbguth on transaction history for privacy coins. This report consolidates the key discussions and primary calls to action from the Berlin roundtable.

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NFTs: Regulatory Perspectives and Challenges

The discussion on NFTs, centered on the need for precise definitions and clear assessment criteria to prevent the misclassification of NFTs either as typical crypto assets under MiCAR or as financial instruments under MiFID. Participants stressed the importance of a substance-over-form approach in NFT classification, which requires detailed evaluations of each NFT's components—such as artwork, technical standards, and utility. The discussion highlighted the risks of inconsistent interpretations across EU member states, which could curb innovation and lead to inappropriate regulatory burdens for NFTs.

Call to Action

Regulators should develop and implement clear, detailed criteria for NFT classification that accurately reflect the unique and utilitarian aspects of NFTs, ensuring these guidelines are flexible enough to accommodate the diverse nature of NFTs and prevent their misclassification as traditional financial instruments.

Crypto-Assets Classification under MiCAR and MiFID II

The discussion on crypto-assets classification, focused on the challenges posed by the absence of a universal definition of "financial instruments" in the EU. This lack of clarity has been exacerbated by the advent of MiCAR, raising urgent questions about how crypto-assets should be categorized under both MiFID and MiCAR regimes. The discussion emphasized the need for a nuanced regulatory approach that considers the unique characteristics of crypto-assets, especially those resembling derivatives or stablecoins, to avoid stifling innovation or enabling regulatory arbitrage.

Call to Action

Regulators should refine and clarify the classification guidelines for crypto-assets within the MiCAR framework by developing specific, substance-based criteria that reflect the unique characteristics and functionalities of these assets. This effort should involve continuous dialogue and collaboration among NCAs and the crypto industry to harmonize regulatory practices and support innovation.

Reverse Solicitation

The discussion on reverse solicitation, focused on the challenges posed by ESMA's Reverse Solicitation Guideline 1 under MiCAR Art. 61(3). Participants expressed concerns that the current guidelines might misinterpret social and professional activities as solicitations, potentially stifling educational and collaborative efforts. The discussion highlighted the need for clearer guidelines to distinguish between commercial solicitation and non-commercial activities like education and professional development.

Grandfathering: Crypto-Asset Offerings Prior to 2025

The discussion on grandfathering, explored the transitional measures within MiCAR for crypto-assets not classified as asset-referenced or e-money tokens. Participants examined the strategic and operational challenges associated with the grandfathering provisions, particularly concerning marketing communications during the transitional period before MiCAR’s full application. The conversation emphasized the importance of clear, strategic planning and ongoing dialogue with regulators to ensure compliance with the new regulations.

Call to Action

Regulators should revise and clarify the definitions within the guidelines to ensure a precise understanding of what constitutes solicitation, explicitly exempting non-commercial activities. Additionally, a labeling system for events should be proposed to clearly identify and exempt non-commercial, educational, or policy-driven activities from being classified as solicitations.

Call to Action

Entities should proactively plan and adapt their marketing strategies to align with MiCAR regulations by the end of 2024, and engage in continuous dialogue with regulators to clarify transitional provisions and ensure a smooth adaptation process.

Grandfathering: Art. 143 Subsec. 3 MiCAR

The discussion on the transitional regime under Art. 143 para. 3 of MiCAR, focused on the challenges and ambiguities surrounding this provision. Participants discussed the need for greater transparency and harmonized guidelines from NCAs and ESMA to ensure that CASPs can effectively plan their compliance strategies. The conversation highlighted the importance of a unified approach to the transitional regime to maintain market integrity and support innovation.

Transaction History for Privacy Coins

The discussion on transaction history requirements for privacy coins, addressed the complexities of MiCAR's Article 76 subsec. 3. Participants debated the interpretation of "transaction history" and its implications for privacy rights under GDPR. The conversation focused on balancing the need for regulatory compliance with the protection of personal data, proposing that disclosure requirements be limited to transactions directly involving the holder.

Frontend Providers for DeFi Operators

The discussion on frontend providers for DeFi operators, explored the regulatory challenges faced by non-custodial frontends under MiCAR. Participants highlighted the need for clear guidelines that recognize the unique operational models of non-custodial frontends to prevent their misclassification as operators under MiCAR. The conversation stressed the importance of distinguishing non-custodial providers from custodial services to preserve the innovative potential of DeFi platforms.

Call to Action

Regulators and industry stakeholders should collaborate to develop clear, detailed guidelines explaining the application and scope of Art. 143 para. 3, ensuring a unified approach across the EU to support a stable regulatory environment for crypto-assets.

Call to Action

Regulators should ensure that disclosure requirements for privacy coins are feasible and proportionate, focusing on transactions directly involving the transacting party. The industry should advocate for privacy-enhancing technologies that meet regulatory requirements without compromising fundamental rights.

Call to Action

Stakeholders in the DeFi ecosystem should actively engage with regulatory bodies to ensure that the unique aspects of non-custodial frontends are understood and appropriately regulated. Efforts should be made to educate regulators and advocate for clear legal definitions and guidelines that reflect the non-custodial nature of these platforms.