On 20 October 2023, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) issued for consultation their draft joint guidelines on suitability assessment of members of management body of issuers of asset-referenced tokens (ARTs) and of crypto-asset service providers (CASPs), and of shareholders and members with qualifying holdings in issuers of ARTs and in CASPs.

By means of background, the Regulation on Markets in Crypto-Assets (MiCA) requires that members of the management body of an issuer of ARTs and of a CASP must be of sufficiently good repute and possess individually and collectively appropriate knowledge, skills and experience and be capable of committing sufficient time to their duties; such firms need to notify their competent authority of any changes to the composition of the management body to allow for the assessment by the competent authority. MiCA also requires that for the purposes of granting authorisation as an issuer of ARTs or as a CASP, shareholders and members that hold, directly or indirectly, qualifying holdings in issuers of ARTs and in CASPs must be of sufficiently good repute and, in particular, must not have been convicted of offences relating to money laundering or terrorist financing or of any other offences that would affect their good repute. Sufficiently good repute has to be maintained at all times by shareholders or members with direct or indirect qualifying holdings.

Draft joint guidelines on the suitability assessment of the members of the management body of issuers of ARTs or of CASPs

The draft joint guidelines provide common criteria to assess the appropriate knowledge, skills and experience of members of the management body as well as their good repute, honesty and integrity and if they are able to commit sufficient time to perform their duties. They address:

• Application of the proportionality principle: Issuers of ARTs, CASPs and competent authorities should take into account the size of the issuer of ARTs or the CASP, its internal organisation and the nature, scale, and complexity of the assets issued and the services provided when assessing the individual and collective sufficient knowledge, experience and skills of members of the management body and that members individually are capable of committing sufficient time to effectively perform their duties in parallel to other obligatory time commitments they have. The draft joint guidelines set out the relevant criteria to be taken into account by issuers of ARTs and CASPs for the purpose of applying the principle of proportionality when assessing the suitability of members as regards the knowledge and experience criteria as well as the members ability to commit sufficient time.

• Notions of suitability: This section of the draft joint guidelines addresses each of the components of the notion of suitability, i.e. sufficient good repute, individual appropriate knowledge, skills and experience, collective appropriate knowledge, skills and experience and sufficient time commitment.

• Suitability assessments of members of the management body by issuers of ARTs and CASPs: In accordance with MiCA, an issuer of ARTs and CASPs should have the primary responsibility for ensuring that the management body collectively and its members individually are suitable at all times. The management bodies of issuers of ARTs and CASPs should adopt a suitability policy. The policy should include principles on the selection, monitoring and succession planning of its members and for re-appointing existing members; issuers of ARTs and CASPs, should perform the assessment or a re-assessment of the suitability of the management body, and its members at various stages of their engagement.

• Issuers of ARTs’ or CASPs’ corrective measures: If an issuer of an ARTs’ or a CASP’s assessment or re-assessment concludes that the management body or a member of the management body does not possess adequate knowledge, skill and experience, or cannot commit sufficient time, the issuer of ARTs or the CASP should take appropriate corrective measures in a timely manner. These may include, for example, adjusting responsibilities between members, replacing certain members, recruiting additional members, training single members or training the management body collectively to ensure that it has appropriate collective knowledge, skills and experience.

• Suitability assessment by competent authorities: Competent authorities must specify the supervisory procedures applicable to the suitability assessment of members of the management body of issuers of ARTs and CASPs, and ensure that a description of those assessment procedures is publicly available.

• Decision of the competent authority: Competent authorities should take a decision based on the assessment of individual and collective suitability of members of the management body within the maximum period of 6 months.

Draft joint guidelines on the suitability assessment of shareholders and members with qualifying holdings in issuers of ARTs or of CASPs

The draft joint guidelines provide competent authorities with a common methodology to assess the suitability of the shareholders and members with direct or indirect qualifying holdings for the purposes of granting authorisation as issuers of ARTs or as CASPs, and for carrying out the prudential assessment of proposed acquisitions. They address the following factors:

• Acting in concert, significant influence, indirect shareholders, decision to acquire: Competent authorities must determine whether the circumstances giving rise to a proposed acquisition of a qualifying holding in a target undertaking are met, preliminary to the assessment of the suitability of the proposed acquirer. For these purposes competent authorities should apply the assessment methodology set out in the Joint ESAs Guidelines on Qualifying Holdings.

• Assessment of suitability of shareholders or members, whether direct or indirect, with qualifying holdings at authorisation: Competent authorities must assess whether the proposed acquirer with qualifying holdings in an undertaking applying for an authorisation under MiCA are of sufficiently good repute. For the assessment of the reputation of the proposed acquirer, competent authorities should apply the methodology set out in the Joint ESAs Guidelines on Qualifying Holdings.

• Assessment of the suitability of a proposed acquirer of a qualifying holding: For all of the assessment criteria the draft joint guidelines make reference to the Joint ESAs Guidelines on Qualifying Holdings.

The deadline for comments on both sets of draft joint guidelines is 22 January 2024. On 9 January 2024, the EBA will host a public hearing on various MiCA mandates, including on the draft guidelines. It is expected that the final version of the guidelines will be available when MiCA enters into force. It is expected that the final versions of the draft joint guidelines will be available when MiCA becomes applicable.