Introduction
With the Markets in Crypto-Assets Regulation (MiCA) now partially in force across the EU, and full applicability looming by the end of 2025, understanding the legal classification of crypto-assets is critical for issuers, investors, and crypto-asset service providers (CASPs).
For firms operating in EU jurisdictions, getting this classification right is the cornerstone of MiCA compliance.
Cyprus Regulatory Update: As of mid-2025, CASPs must begin MiCA licence applications with CySEC. Issuers of ARTs/EMTs must engage with CySEC for pre-approval and whitepaper validation. Whitepapers where applicable, must be submitted with CySEC.
1. Why Token Classification Matters
Under MiCA, the classification of a crypto asset determines the following:
- Whether authorisation is required for issuance or trading,
- The whitepaper obligations,
- The ongoing compliance duties e.g., own funds, governance, disclosures, and
- The level of regulatory scrutiny applied by the national competent authority -in Cyprus, CySEC.
Incorrect classification can result in regulatory investigations, forced delisting or suspension, financial penalties and civil or criminal liability for misleading investors.
2. The Three Legal Categories of Crypto-Assets under MiCA
MiCA classifies crypto assets into three main legal categories:
(a) E-Money Tokens (EMTs) – Digital Versions of Fiat Money:
These are defined in MiCA as “crypto assets that purport to maintain a stable value by referring to the value of one official currency.”
Examples include stablecoins pegged 1:1 to a fiat currency e.g., euro, USD and centralised tokens used for payments or remittances.
EMTs are treated similarly to electronic money under PSD2 and the E-Money Directive (EMD2) and must offer redemption rights to users at any time and at par value.
CASPs dealing with EMTs may also fall under payment services laws, triggering dual regulation (MiCA and PSD2), although the EBA’s No-Action Letter (June 2025) offers temporary relief. The Regulatory Overlap of MiCA and PSD2: What E-Money Token Issuers and CASPs Must Know
(b) Asset-Referenced Tokens (ARTs) – Pegged to Multiple Assets:
Under MiCA, these are defined as “crypto-assets that purport to maintain a stable value by referencing any value or right or a combination thereof, including one or more official currencies, commodities, or crypto-assets.”
Examples include stablecoins backed by baskets of fiat currencies, commodities e.g. gold, or even other cryptocurrencies, and tokenised real estate or ETFs referencing traditional financial instruments.
ARTs are more tightly regulated due to their complexity and systemic risk. Issuers must be authorised and publish a MiCA-compliant whitepaper.
ARTs are subject to governance rules, reserve asset requirements, stabilisation mechanisms and ongoing disclosure obligations.
If an ART becomes “significant” e.g., based on user numbers or transaction volume, ESMA and EBA may co-supervise alongside national regulators.
ARTs must not be marketed or offered in Cyprus without prior notification to CySEC and approval of whitepaper. Many ARTs may also trigger MiFID II, UCITS, or prospectus regulation obligations depending on how they are structured.
(c) Other Tokens – Utility Tokens and Everything Else:
These are crypto assets that are not classified as ARTs or EMTs and which fall into a general category, often referred to as “utility tokens” or “other tokens.”
Examples include tokens granting access to a blockchain service e.g., storage, staking, voting, governance tokens (if not structured as securities), and NFTs (subject to conditions – see below).
Issuers must publish a whitepaper (unless exempted) and notify the national competent authority (in Cyprus, CySEC) before public offering or trading on a crypto platform.
No authorisation is required to issue non-ART/EMT tokens unless a person is offering CASP services e.g., custody, trading, exchange.
Note on NFTs:
MiCA excludes unique, non-fungible tokens (e.g., digital art NFTs), unless they are effectively fungible or fractionalized, in which case they may fall back into “other tokens” or even ARTs/EMTs.
3. How to Determine Classification
To determine if a token qualifies as an ART, EMT, or other crypto asset, the following questions should be asked:
Question | If Yes → Likely Classification |
Is it pegged 1:1 to a fiat currency?
| EMT |
Is its value linked to a basket of assets (fiat, commodities, other tokens)? | ART |
Does it give access to a blockchain service or governance rights?
| Other Token |
Can it be redeemed for cash? | May be EMT or ART |
Is it issued in exchange for fiat as consideration? | Likely EMT |
Is it marketed as an investment? | Possible overlap with MiFID financial instruments + source of funds for high-risk wallets |
Legal Grey Areas and Concerns
Despite MiCA’s efforts to create regulatory clarity, several legal grey areas remain, where the classification and treatment of certain crypto-assets raise complex questions and potential compliance risks for issuers and CASPs.
- Hybrid tokens: Some tokens may combine features of utility and payment, triggering both MiCA and PSD2.
- Algorithmic stablecoins: If not “fully backed,” may face extra scrutiny or prohibition.
- Token wrappers: Synthetic tokens e.g., wBTC, wETH, may trigger custody or securities law obligations.
- NFT platforms: May fall in scope if tokens are fractionalised or mass issued.
Our law firm provides advice and supports clients with token classification legal opinions, whitepaper compliance and legal drafting, and with MiCA licence applications for issuers and CASPs. We represent clients before CySEC and provide structuring advice to avoid dual regulation under MiFID or PSD2.
Disclaimer
This article does not constitute legal advice and is not intended to provide an exhaustive analysis of the topic. For information or guidance on this matter, you should seek legal counsel. You may contact us for appropriate assistance.
