The Cyprus Securities and Exchange Commission (CySEC) this week announced its adoption of the European Banking Authority’s (EBA) guidelines on governance for issuers of asset-referenced tokens (ARTs).
These guidelines, issued in June 2024, aim to bolster the management and oversight of ART issuers, ensuring enhanced consumer and investor protection.
The guidelines, under Article 16 of Regulation (EU) No 1093/2010, provide a framework for governance arrangements in line with the Markets in Crypto-Assets Regulation (MiCAR).
They outline tasks and responsibilities for management bodies, the organisation of issuers, and the role of independent risk management and compliance functions.
CySEC said that these measures aim to “ensure the sound management of all risks associated with the activities of issuers of ARTs, while providing for appropriate consumer and investor protection”.
A notable requirement under these guidelines is the establishment of a business continuity policy.
Issuers must guarantee the uninterrupted performance of core activities related to ARTs, even during system disruptions.
This underscores the importance of proportional resource allocation, reflecting the scale and complexity of the issuer’s operations.
CySEC stressed the significance of risk management, highlighting the roles of the “second line of defence (independent risk management and compliance function) and the third line of defence (internal audit function)” to uphold robust oversight.
The commission also pointed out that the guidelines take effect on December 20, 2024.
The adoption of the EBA’s governance guidelines by cysec reflects a broader shift in the European regulatory landscape under the Markets in Crypto-Assets Regulation (MiCAR).
MiCAR establishes a unified framework for crypto-asset issuers and service providers across the EU.
These measures are aimed at ensuring financial stability and enhancing investor protection in an increasingly complex and rapidly evolving digital asset market.
The EBA’s final report on Guidelines on Recovery Plans (November 2024) underpins this framework, requiring issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs) to develop robust recovery plans.
These plans are designed to restore compliance with asset reserve requirements during periods of significant stress.
Among other provisions, the guidelines require issuers to identify risks, establish governance structures, and implement recovery options, including liquidity and capital-strengthening measures.
The inclusion of tools such as a de-pegging risk indicator highlights the focus on preventing adverse market impacts, such as token mispricing and mass redemption events.
