There has recently been a rise in fractionalized assets which has caught the attention of regulators. A fractionalized asset is a set of fungible tokens that are issued to represent one’s NFT. The leaked draft showed that MiCA would not apply to NFTs that are genuinely unique and incapable of being traded with each other. In the Recital, even if the issuer gave the fractionalized asset a unique identifier, “the issuance of crypto-assets as non-fungible tokens in a large series or collection should be considered as an indicator of their fungibility”.
The exact drafting used to determine whether the regulation covers the bulk of the NFT market is unclear and has caused concern within the industry. However, EU regulators will adopt a substance over form approach. The features of the asset in question should determine the qualification, not the designation by users.
The new draft also features changes indicating the regulation of algorithmic stablecoins, which were excluded from the scope when MiCA was first introduced in 2020. Algorithmic stablecoins are crypto assets whose value is supported by another crypto asset, designed to maintain a stable price. An algorithmic stablecoin relies on two types of tokens, a stablecoin and another crypto asset supporting the stablecoin used. Algorithmic stablecoins should fall within the scope of regulation “irrespective of how the issuer intends to design the crypto asset, including the mechanism to maintain a stable value. The Recital goes on to indicate that “offerors or persons seeking admission to trading of algorithmic crypto assets that do not aim at stabilizing the value of the crypto assets… should, in any event, comply with Title II of the regulation”.
