Issuing German Asset-Referenced Token (ART)
Legal Excellence
The issuance of German asset-referenced tokens (ART) has been regulated by the Markets in Crypto-Assets Regulation (MiCAR) and supervised by BaFin since mid-2024. In particular, the issuance requires the issuer to obtain a licence/authorisation and to publish a white paper. Kronsteyn provides you with professional legal advice and supports you throughout this process.
Definition of ART
The regulation of an instrument as an ART is primarily determined by the relevant MiCAR definition. According to MiCAR, ART are crypto-assets that are not electronic money tokens (EMT) and that purports to maintain a stable value by referencing another value or right, or a combination thereof, including one or more official currencies. An example of this would be Tether Gold (XAUT), although the company Tether, headquartered in the British Virgin Islands, is generally not subject to MiCAR regulations.
Tokens may fall within the scope of the ART definition regardless of their value stabilisation mechanism. This means that so-called algorithmic stablecoins, where the supply of tokens is increased or reduced in response to changes in demand, may also be captured. However, as a legal consequence, the requirements of MiCAR must then be implemented, ultimately excluding algorithmic ART from the scope of ART permissible under MiCAR.
Alongside electronic money tokens, ART belong to the group of tokens commonly referred to as stablecoins.
Legal Structure of ART
Under MiFIR, an asset-referenced token (ART) represents a claim by the holder against the issuer for redemption. The holder may demand redemption not only in the form of a monetary amount equivalent to the market value of the reference asset (e.g., gold), but also through the physical delivery of the reference asset.
Redemption must generally be possible free of charge. However, it is permissible to charge a fee upon the issuance of the ART. By law, the issuer is prohibited from paying interest on the holder’s redemption claim.
The contractual relationship between the holders and the issuer is governed by the issuer’s terms and conditions (T&Cs) and may be subject to German law.
Kronsteyn has proven expertise in German and European crypto law. Among other projects, the law firm provided legal advice on the successful market launch of the first German OTC crypto trading system tailored to the mass market and the first crypto MTF.
WM Article
Müller-Lankow/Liebscher, Legal differences between e-money and asset-referenced tokens (German: Rechtliche Unterschiede zwischen E-Geld- und vermögenswertereferenzierten Token), in: Wertpapier-Mitteilungen (WM) 2024, pp. 1152-1160 (German only)
Licensing Requirement for ART Issuers
The circle of potential issuers of asset-referenced tokens (ART) is limited to certain licensed entities. In addition to CRR credit institutions, which are authorised to issue ART on the basis of their existing banking licence, other entities may issue ART provided that they have been granted a licence or authorisation by BaFin. As part of the formal authorisation procedure, BaFin must be satisfied — through the submission of comprehensive documentation — that the issuer is capable of fulfilling its regulatory obligations in relation to the ART issued.
The scope of the application documents to be submitted is defined in Article 18 MiCAR and a delegated regulation, which at the time of preparing this text was still in draft form.
Key points of assessment in the licensing/authorisation process include IT security and the safeguarding and management of the reserve of assets designed to protect the rights of token holders. This reserve must be insulated from the issuer’s insolvency and held with a custodian. It must essentially consist of, or refer to, the assets to which the ART relates, and market, credit, and concentration risks must be minimised in accordance with specific requirements.
White Paper
Furthermore, the issuance of ART as part of a public offering requires a white paper, which must be approved by BaFin. The white paper serves to inform potential investors about the characteristics, functions, and risks of the tokens. Functionally, it fulfils the same purpose as a securities prospectus or a prospectus for units in investment funds or asset investments. As is already familiar, the structure and content of the white paper are specifically regulated under MiCAR. Further details can be found in Article 19 MiCAR and Implementing Regulation (EU) 2024/2984.
Legal Services of Kronsteyn
Kronsteyn specialises in German and European financial markets law and has successfully handled numerous licensing and authorisation procedures, as well as providing legal support for the issuance of securities, investment funds, and asset investments. In the field of crypto advisory, the firm is regarded as part of the legal crypto avant-garde, having advised on some of the first major crypto projects in Germany. With regard to asset-referenced tokens (ART), the range of services includes, among other things:
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Conceptualisation/validation of the planned token project from a regulatory, civil law, and tax law perspective
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Support throughout the licensing and authorisation procedure with BaFin
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Preparation of a white paper in accordance with MiCAR, as well as terms and conditions (T&Cs)
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Legal opinions and expert reports on particularly complex individual matters
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Drafting of structural agreements, such as outsourcing or cooperation agreements
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Defence against investor law suits
