COMPLIANCE WITH REGULATION
COMPLIANCE WITH REGULATION
Markets in Ctypto-Assets (MiCA)
Identification of MiCA document used: TA-9-2023-0117_EN
All crypto-asset services of the Equivalence Protocol V2 and related tokens (EQT, WEQT, asset-referenced and e-money tokens) are provided in a fully decentralized manner, therefore according to the text of MiCA from April 2023, those do not fall within the scope of the regulation, as per (22):
(22) This Regulation should apply to natural and legal persons and certain other undertakings and to the crypto-asset services and activities performed, provided or controlled, directly or indirectly, by them, including when part of such activities or services is performed in a decentralised manner. Where crypto-asset services are provided in a fully decentralised manner without any intermediary, they should not fall within the scope of this Regulation. This Regulation covers the rights and obligations of issuers of crypto-assets, offerors, persons seeking admission to trading of crypto-assets and crypto-asset service providers. Where crypto-assets have no identifiable issuer, they should not fall within the scope of Title II, III or IV of this Regulation. Crypto-asset service providers providing services in respect of such crypto-assets should, however, be covered by this Regulation.
Also according to (22) – asset-referenced or e-money tokens related to the project are created by an autonomous smart contract, which the Development Team does not own. Those tokens do not include any concept of ownership of the smart-contract or any special rights or functions for an owner of the smart contract. Tokens are issued only as a self-service by the users, there is no identifiable issuer and therefore the tokens do not fall within the scope of this regulation.
(note: At the time of writing, mentioned asset-referenced or e-money tokens are not developed yet, however their future parameters and functionality is already known based on the equivalent smart-contract related to the previous version of Equivalence Protocol)
In addition, the asset-referenced or e-money tokens developed and deployed by the Equivalence Protocol Team (not the third party versions of thereof) cannot be transferred to other holders which also makes these excluded from the scope of this regulation according to (17)
(17) Digital assets that cannot be transferred to other holders do not fall within the definition of crypto-assets. Therefore, digital assets that are accepted only by the issuer or the offeror and that are technically impossible to transfer directly to other holders should be excluded from the scope of this Regulation. Examples of such digital assets include loyalty schemes where the loyalty points can be exchanged for benefits only with the issuer or offeror of those points.
To ensure that no legal issues could arise, in a case that minting of the new EQT would not be considered a crypto asset service excluded from the scope of MiCA, the issuance of new EQT will be limited to the amount equal to the value of 1 000 000 EUR during the period of 12 months, or stopped completely, if necessary, by the time of MiCA regulation coming to force in the member state of the residence of token issuer. This limits requirements to the issuer as per TITLE II, Article 4:
TITLE II, article 4
Offers to the public of crypto-assets other than asset-referenced tokens or e-money tokens
1. A person shall not make an offer to the public of a crypto-asset other than an asset-referenced token or e-money token in the Union unless that person:
(a) is a legal person;
(b) has drawn up a crypto-asset white paper in respect of that crypto-asset in accordance with Article 6;
(c) has notified the crypto-asset white paper in accordance with Article 8;
(d) has published the crypto-asset white paper in accordance with Article 9;
(e) has drafted the marketing communications, if any, in respect of that cryptoasset in accordance with Article 7;
(f) has published, the marketing communications, if any, in respect of that crypto-asset in accordance with Article 9;
(g) complies with the requirements for offerors laid down in Article 14.
2. Paragraph 1, points (b), (c), (d) and (f), shall not apply to any of the following offers to the public of crypto-assets other than asset-referenced tokens or e-money tokens:
(a) an offer to fewer than 150 natural or legal persons per Member State where such persons are acting on their own account;
(b) over a period of 12 months, starting with the beginning of the offer, the total consideration of an offer to the public of a crypto-asset in the Union does not exceed EUR 1 000 000, or the equivalent amount in another official currency or in crypto-assets;
(c) an offer of a crypto-asset addressed solely to qualified investors where the crypto-asset can only be held by such qualified investors
While according to TITLE II, article 4 of MiCA, the issuer is not required to publish a white paper of the Equivalence Protocol V2, the development team will still do so, but will exclude personal details that would be otherwise necessary in the case that White Paper would be required by MiCA. The white paper will be created in accordance with MiCA where possible/applicable and state the fact that the white paper is not fully covering the requirements of MiCA, because it is not required according to TITLE II, article 4.
Transfers of Funds and Certain Crypto-Assets
Regulation: AM\P9_AMA(2022)0081(002-002)_EN
(22) This Regulation should not apply to person-to-person transfers of crypto-assets conducted without the involvement of a crypto-asset service provider, or to cases where both the originator and the beneficiary are providers of transfer services for crypto-assets acting on their own behalf.
All transfers of funds related to the Equivalence Protocol V2 are realized in a decentralized manner and therefore in principle there can't be any involvement of a crypto-asset service provider in the transfer.
Classification of Tokens
Due to recent confusion related to some cryptocurrencies being considered securities in the USA, (as of yet no such situation has appeared in EU) for the case that such situation would appear in EU in the future, I’m adding following statement for clarity:
The asset-referenced tokens or e-money tokens developed by our team are not a security. Because they do not provide a yield or promise an increase in value, they are only a representation of other assets.
In addition, the contract is not owned by the Development Team and the issuance of tokens can’t be affected by the Development Team, except tokens the team members would create for themselves in exchange for EQT - just as any other regular user.
The EQT or WEQT is also not a security. While there exist a reward for holding the tokens, it is created as a means of stabilizing the supply of tokens if/after any issuance of the new tokens by the issuer is stopped.
The rewards are not presented as a means of gaining guaranteed return and it is clearly stated that the rewards will not apply when total supply of the tokens will reach 100 000 000. The tokens are also not presented as safe or no risk investment. Over the long term average the rewards and fees should be cancelling each other, resulting in 0% reward/fee (this is on the average, for individual users the situation may differ).