Joint Industry Letter on the Application of PSD2 to EMTs

On Wednesday, the 28th, ADAN, along with the Electronic Money Association (EMA), Blockchain for Europe (BC4EU), the Crypto Council for Innovation (CCI), the European Blockchain Association (EBA), the European Crypto Initiative (EUCI), and the European Payments Institutions Federation (EPIF) sent aletter to the Directorate-General for Financial Stability, Financial Services, and Capital Markets (European Commission) and the European Banking Authority (EBA), requesting clarification on the application of the Payment Services Directive (PSD)tofiat-backed stablecoins(electronic money tokens—EMT—under MiCA)and EMT services, the application of which is anticipated under the MiCA Regulation (MiCA) starting in June 2024.

Article 48 of MiCA stipulates that EMTs "are deemed to be" electronic money. Consequently, EMTs could be considered funds within the meaning of the Payment Services Directive, and EMT issuers and entities providing payment services using EMTs would fall within the scope of the current Payment Services Directive. 

In light of the foregoing,significant legal uncertainty remains regarding the nature of EMTs and the scope of application of the Payment Services Directive’s rules to EMTs. In this letter, we ask the European Commission and the EBA to clarify the application of the PSD to EMTs and to develop additional guidance on how the PSD rules could be adapted to apply to EMTs and the distributed ledger ecosystem.

The letter also acknowledges the difficulties arising from the application of payment provisions that were drafted with a view to a typically centralized control of payment IT infrastructure. In contrast, crypto-asset service providers (CASPs) and issuers providing EMTs have limited control over the technical infrastructure, which prevents them from complying with the relevant provisions.

Finally, the letter states thatthe sector is eager to engage with regulators to establish an effective European framework for EMT services and that it is prepared to participate in a joint government-industry working group to achieve regulatory clarity. Legal uncertainty would lead to a significant decline in economic activity related to EMTs in the EU and would further hinder the growth of euro-denominated EMTs.