What’s the Difference Between EMT vs. ART in MiCA?

When I reached the chapter about stablecoins, while lecturing business school students on blockchain and cryptocurrency, I didn’t expect anyone to raise the topic of how MiCA classifies them. And I was right: nobody mentioned Electronic Money Tokens (EMT) nor Asset-Referenced Tokens (ART).

Working among experts makes us forget about the complex language we tend to use. I am certain that the EU lawmakers behind the MiCA regulation are the same.

But as my students concluded correctly that crypto and stablecoins were actually pretty simple, I am confident that they could immediately grasp the difference between EMTs and ARTs.

I will give it to you in the simplest, shortest way:

• An Electronic Money Tokens (EMT) is backed by a single official currency;
• An Asset-Referenced Tokens (ART) is backed by one or more assets, not necessarily official currencies.

That’s all there is to it. If you have a finance background, you will immediately feel the parallel with financial products such as an ETF or an Index Fund for ARTs. EMTs are textbook stablecoins.

This is the difference in definition. Now, let’s talk about the regulatory aspects and their implications.

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Definition and mechanism

MiCA’s Article 3 legally defines Electronic Money Tokens (EMT) and Asset-Referenced Tokens (ART) as such:

• EMT references a single official currency; 
• ART references another value or right, or a combination thereof, including one or more official currencies.

This is straightforward. Note: an EMT has to rely on a single official currency, one and no more. If we talk about a basket of currencies, the ART classification applies.

What also differentiates them is how they are regulated, the conditions to fulfill to issue one or the other.

EMT issuers must be authorized as either a credit institution or an electronic money institution and comply with MiCA’s reserve, redemption, and disclosure requirements. Significant EMTs (those exceeding defined user or transaction thresholds) fall directly under the supervision of the European Banking Authority (EBA).

ART issuers require an authorization from the National Competent Authority (NCA) and must meet stricter reserve and governance standards than EMT issuers.

Not a single ART issuer has been authorized under MiCA at least when this article is in the writing, reflecting both the limited demand and the stringency of the requirements. We wrote a study touching on that topic.

Trigger: When to ask the question of “ART or EMT?”

Issuing an EMT or ART in the European Union requires authorization under the MiCA framework. Offering it to the public before authorization is strictly prohibited.

For a project willing to issue a stablecoin in Europe, determining its classification and acknowledging the requirements are then mandatory steps before public offering.

Once the classification is clear, everything falls in line. And the classification is obvious for the majority of the projects. In certain cases, a legal opinion may be preferable before taking any action.

Take for example a token whose value derives from BTC. Though officially a currency, as it is registered as such in a few countries, BTC isn’t considered an official currency in the EU. There is a matter for debate.

Or say for example that a token derives its value from a combination of Euro (EUR) and Danish Crowns (DKK). The Danish currency is pegged to the Euro, meaning that both assets’ value are close to invariable. Since this token refers to two different values, it would be considered as an ART. But as it refers to two intertwined currencies, NCAs could have a say on the matter.

Finally, we mentioned that “significant” tokens can fall under the direct supervision of the EBA. For this event to trigger, three of the following criteria must be true:

• User Base: The number of holders of the token is larger than 10 million;
• Market Value/Reserve Size: The value of the token issued, its market capitalization, or the size of the issuer’s reserve of assets is higher than EUR 5,000,000,000;
• Transaction Volume: The average number and average aggregate value of daily transactions are higher than 2.5 million transactions and EUR 500,000,000, respectively;
• Gatekeeper Status: The issuer of the token is designated as a “gatekeeper” (a provider of core platform services) in accordance with Regulation (EU) 2022/1925;
• International Scale: The activities of the issuer have significance on an international scale, which includes the use of the token for payments and remittances;
• Financial Interconnectedness: The token or its issuer is highly interconnected with the traditional financial system;
• Multiple Tokens and Services: The same issuer issues at least one additional ART or EMT, and also provides at least one crypto-asset service.

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Implication: Two completely different roadmaps

Depending on the classification of your token, the roadmap to issuance is going to be drastically different.

Once again, proper assessment is vital. A legal opinion is recommended for EMTs and mandatory for ARTs.

If the project qualifies as an EMT, the most notable point is the requirement to register as a credit institution or an electronic money institution, in addition to a token issuer. In Europe, such authorization can take close to a year, meaning proper anticipation is important.

Another important specificity of EMTs is that holders have a direct claim at par value, at any time. This implies, among other things, that the token issuer must have a 1:1 reserve for solvability in case of a “bank run” event.

In the case of ARTs, efforts must focus on proper documentation of the underlying assets of the token and its mechanisms (if any). This implies documenting extensively on reserve composition and custody.

In both cases, authorization requires the submission of a whitepaper, compliant with the regulation. For EMTs, as the issuer must be a credit institution or electronic money institution, notification to the NCA is required only. In the case of ARTs, it’s a complete approval process.

The whitepaper has different requirements for ARTs (set in Annex II of MiCA) and EMTs (set in Annex III of MiCA).

Resolution

I hope the distinction is now clear for all our readers.

Founders and legal teams should first and foremost ask themselves if they have understood the implications of going for one or the other type of crypto-asset. In case of doubts, a legal opinion is the next step you’re looking for.

A classification-first approach, in practice, means:

• Compliance is built into the product design, not retrofitted a posteriori;
• The team understands what the regulator expects and is looking at;
• Mapping the token’s reference structure (substance over form).

Our consultants are here to guide you through the process, whichever stage you are in right now.

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