BETTER FINANCE welcomes the opportunity to contribute to the European Commission’s targeted consultation on the review of the Markets in Crypto-Assets Regulation (MiCAR). We regard MiCAR as a sound foundation for regulating crypto-assets, while recognising the need to assess its implementation, address identified gaps and legal uncertainties, and clarify contested interpretations. Although practical experience with the framework remains relatively limited, certain disclosure and investor protection issues already warrant supervisory action and targeted clarification. We therefore support improvements to the existing regime, alongside further monitoring of market practices to determine where additional regulatory safeguards or legislative adaptations may be necessary.
The consultation also provides an opportunity to offer preliminary views on the broader regulatory framework for digital assets, including tokenisation and distributed ledger technology (DLT). We call for such developments to improve market access, reduce unnecessary intermediation and support more efficient and integrated European capital markets rather than complexify it. Ultimately, their benefits should translate into lower total costs for investors, transparent services, enforceable rights and greater interoperability between market operators. In this sense, we support technology neutrality as a key principle, but it must not become a means of circumventing established sectoral protections. Observed easier access to (digital) financial products, particularly increasingly complex ones, does not in itself guarantee better investment outcomes – and rather calls for strengthening investor protections and fiduciary duties of firms.
Against this background, BETTER FINANCE advocates an approach combining effective enforcement of existing rules, timely clarification of identified gaps and proportionate reforms informed by evolving market practices. Our preliminary recommendations focus on the economic functions, legal rights and risks of digital assets and services, while seeking to preserve opportunities for innovation that deliver tangible benefits to European consumers and investors.
1. Close MiCAR disclosure gaps and enforce existing duties
Our observation calls for the availability, accessibility and reliability of crypto-asset white papers to be of immediate priority. Responsibilities should reflect actual activities: issuers, offerors, trading-platform operators, principal exchanges, brokers and order routers have distinct roles that may overlap. A CASP's service authorisation or commercial label does not, in itself, determine its obligations as an offeror or establish a disclosure exemption.
The Commission and ESMA should promptly clarify or correct Q&As 2404, 2552 and 2654, addressing public-offer triggers, assets without an identifiable issuer and transitional arrangements for legacy tokens. Their interpretations must be reconciled with the applicable provisions of MiCAR, without treating disputed legal questions as settled. Existing obligations should be enforced consistently, while targeted Level 1 amendments should be considered where interpretation alone cannot close genuine gaps. In particular, retail distribution outside multilateral trading platforms should not leave responsibility for essential asset-level information indefinitely unresolved.
2. Provide concise, comparable information before purchase
BETTER FINANCE proposes consideration of a standardised Token/Coin Information Document, inspired by the PRIIPs KID, to provide accessible, comparable information on an asset's purpose, legal rights, responsible persons, costs, governance, backing, dependencies and available recourse. Meaningful and appropriately dated volatility, liquidity and performance indicators should help investors assess risks, with methodological limitations made clear.
Such a document should complement legally required white papers and provide a minimum standard of asset-level information where no white paper is genuinely required or available under applicable rules, including transitional provisions – and not be substituted for a white paper that is legally required.
The review should establish clear responsibilities for preparing, verifying, updating and distributing information, including safeguards against conflicts of interest where providers benefit from offering or trading the assets concerned. Common disclosure formats and improvements to ESMA's public register could also facilitate comparison, reduce duplication and support effective supervision.
3. Clarify EU classification and prevent hybrid products from bypassing safeguards
Crypto-assets qualifying as financial instruments should remain governed by MiFID/MiFIR, MAR, the Prospectus Regulation and other applicable sectoral rules. Necessary adaptations should facilitate DLT-based issuance and settlement without weakening established investor protections.
Hybrid tokens, wrapped assets, tokenised fund interests and synthetic exposures warrant particular attention, as their legal structures and economic characteristics may blur regulatory boundaries. Classification should follow the actual rights, functions and risks of a product, rather than its technological form or marketing label. An investor receiving a token representing shares should know whether they acquire genuine ownership rights, an intermediary claim or merely price exposure.
We advocate more harmonised EU definitions and an ESMA-led mechanism, supported by an appropriate legislative mandate, to resolve recurring borderline cases and prevent regulatory arbitrage. As a potential strengthening of the regulatory perimeter, we also propose a presumption towards the financial-instrument framework for hybrid products conferring substantively equivalent financial rights or exposures, subject to authoritative classification. This would require legislative consideration: an expectation of profit alone is not sufficient to establish financial-instrument status under current rules.
Further monitoring of emerging product structures and national supervisory approaches should inform these reforms. Products remaining outside the financial-instrument perimeter must nevertheless be subject to proportionate retail safeguards.
4. Make token ownership, custody and recovery clear and legally reliable
Tokenisation should improve, rather than complicate, investors' ability to establish and exercise their rights. Investors must understand whether a token conveys direct ownership, an enforceable claim to an underlying asset or synthetic price exposure, including the associated voting, income and transfer rights where relevant.
Where assets are represented or held through intermediaries, providers should substantiate the legal link between tokens and underlying holdings, explain custody arrangements and clarify what happens upon issuer, custodian or platform failure.
Further EU assessment should identify and address legal uncertainties affecting ownership, transfers, third-party enforceability, custody chains, settlement finality and insolvency recovery, particularly in cross-border arrangements. Tokenised deposits and securities may offer opportunities for more efficient settlement and liquidity management, but their practical benefits should be demonstrated through improved interoperability, portability and lower costs, without creating new dependencies on proprietary infrastructures.
5. Strengthen retail distribution safeguards and supervisory accountability
MiCAR's conduct requirements should be assessed against the practical risks of increasingly accessible, self-directed crypto-asset services. In particular, proportionate appropriateness assessments should be considered for reception and transmission, execution and placing of crypto-assets, taking account of both the service and the product's complexity.
Relatively straightforward spot purchases may justify simpler checks, whereas non-spot or more complex arrangements involving leverage, synthetic exposures, yield-generating structures, uncertain redemption or loss of custody control warrant more targeted assessments. This distinction does not imply that ordinary spot crypto-assets are low risk. Nor should generic warnings substitute for meaningful disclosure or necessary safeguards.
Marketing controls should address misleading claims, harmful gamification, paid influencers, insider-sale conflicts and practices encouraging impulsive or excessively risky transactions. Assessments must complement providers' responsibilities rather than shift the burden of investor protection onto consumers.
We also welcome the proposal, under the Market Integration and Supervision Package, to centralise CASP authorisation and supervision under ESMA, in coordination with national authorities and while preserving relevant sectoral authorisations. Effective supervision should pay particular attention to affiliated execution, custody and market-making arrangements, market manipulation and operational dependencies. Authorisation must not create misleading expectations of compensation or protection against investment losses.
6. Address DeFi, staking and lending according to their actual functions and risks
Decentralised finance (DeFi) may improve transparency, interoperability and efficiency while reducing unnecessary intermediation. However, market developments require continued assessment of whether these benefits materialise and how risks are allocated between users, protocols and identifiable service providers.
Claims of decentralisation should be assessed against actual governance and control, including the ability to modify protocols, manage interfaces, collect fees or intervene in transactions. Regulatory responsibilities should reflect these functions, rather than automatically treating every decentralised protocol as a traditional intermediary.
BETTER FINANCE supports consideration of proportionate requirements for CASP-facilitated DeFi, staking and intermediated crypto lending and borrowing, particularly regarding consent, collateral, asset reuse, leverage, liquidation, custody, withdrawal restrictions and insolvency. Due diligence and disclosures should explain relevant operational dependencies and available recourse.
Targeted certification and smart-contract audits may help address specific higher-risk uses, but should not be presented as guarantees of safety or substitutes for enforceable legal duties. Further monitoring and supervisory evidence will be important in determining the appropriate scope and calibration of additional requirements.
7. Ensure stablecoin redemption and safeguarding work, also under stress
Stablecoin arrangements should provide clear and enforceable redemption rights supported by adequate reserves, transparent custody, sound liquidity management and operationally credible recovery and wind-down arrangements.
The different legal entitlements attached to e-money tokens (EMTs) and asset-referenced tokens (ARTs) must remain clear to holders, including the distinction between redemption rights and secondary-market price stability.
Global issuance and multi-jurisdictional reserve arrangements warrant particular scrutiny regarding issuer liability, reserve availability, cross-border supervisory cooperation and enforceability during stress. We favour clear allocation of responsibilities and consideration of priority protection for EU holders over EU-held reserves backing their claims, subject to further legal and operational assessment. Measures should avoid unintended restrictions on transferability or unequal treatment that could undermine holders' rights.
Any recalibration of quantitative or prudential requirements should be evidence-based. Yield-bearing arrangements also require separate scrutiny, since rights against a stablecoin issuer do not necessarily protect assets transferred to another party through lending or similar structures.
8. Monitor emerging speculative products and prevent regulatory circumvention
Market developments also call for continued assessment of products that do not fit neatly within existing regulatory categories.
NFTs should be subject to clear information on authenticity, provenance, underlying assets and the rights actually transferred. Series issuance, fractionalisation and investment-linked arrangements require substance-based classification, rather than reliance on an NFT label.
Prediction markets raise distinct concerns regarding speculation, conflicts, manipulation and consumer harm. Their treatment should reflect their legal and economic characteristics under applicable financial-services or gambling legislation. They should not be promoted as suitable retail investments merely because they rely on DLT or produce potentially informative signals.
Likewise, crypto perpetual futures qualifying as derivatives must remain subject to the relevant financial-instrument framework, including applicable leverage, margin, liquidation and retail protection requirements.
Further monitoring of market practices should inform whether existing safeguards require clarification, adaptation or additional restrictions. Where risks cannot be adequately controlled, disclosure and appropriateness checks should not substitute for necessary product restrictions or prohibitions.
Regulatory simplification should be pursued through greater harmonisation, common standards and proportionate requirements, without weakening accountability or existing investor safeguards. The immediate priority is to make existing protections work effectively; further reforms should be informed by evidence of market developments, investor risks and demonstrable benefits.
Digitalisation and tokenisation should contribute to more accessible, competitive and integrated European capital markets, rather than create new forms of fragmentation or unnecessary intermediation. Ultimately, the success of digital finance should be measured not only by technological innovation or market growth, but by its ability to deliver lower costs, reliable investor rights, effective protection and better outcomes for European citizens, in line with the objectives of the Savings and Investments Union.
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