The term ‘crypto-asset’, which is often used as an umbrella term to refer to digital tokens that are issued and transferred on DLT (Distributed Ledger Technology) systems, lacks a specific definition.
When it comes to regulatory compliance in the blockchain world, the lack of clear and common terminology is a significant impediment to the legal assessment of a project. The regulators themselves face several challenges, to understand the nuances of the different terms, identify the most-suitable terminology for their regulatory objectives and define the taxonomy and use it consistently in official statements.
While there is no explicit agreement on the definitional boundaries to date, we offer a review of regulatory crypto-asset definitions in some selected European jurisdictions.
Cryptoasset Definition in the European Union
On the one hand, the EU defines ‘crypto-assets‘ as a type of private asset that depends primarily on cryptography and DLT or similar technology as part of their perceived or inherent value. Unless otherwise stated, ESMA uses the term to refer to both so-called ‘virtual currencies’ and ‘digital tokens’. Crypto-asset additionally means an asset that is not issued by a central bank.
On the other hand, the EBA defines a ‘virtual currency‘ as a digital representation of value that is neither issued nor guaranteed by a central bank or public authority and does not have the legal status of currency or money. Virtual currency is used by natural or legal persons as a means of exchange and can be transferred, stored or traded electronically.
Estonian law defines a ‘virtual currency‘ as a value represented in the digital form, which is digitally transferable, preservable or tradable and which natural persons or legal persons accept as a payment instrument, but that is not the legal tender of any country or funds.
Even if further clarifications will come from the bill ‘Action Plan for Business Growth and Transformation‘ recently passed by the French parliament, Paris defines ‘tokens‘ and ‘digital assets‘ as intangible assets representing, in digital form, one or more rights, which may be issued, registered, retained or transferred by means of a DLT that identifies, directly or indirectly, the owner of such asset.
Further, they are digital representations of value which are not issued by a central bank or a public authority, not necessarily linked to a legal tender, and do not possess the legal status of currency, but which are accepted by any natural and legal person as a means of exchanges and can be transferred, stored, or exchanged electronically.
The German law defines a ‘crypto-token‘ as a digital representation of value in a blockchain data structure.
According to the law and regulation of Germany, the ‘crypto-assets‘ are assets that not fall into the category of electronic money (as defined by the current European Directive 2009/110/EC) and can be considered as ‘units of accounts.’
The Maltese Virtual Financial Assets Act defines a ‘DLT Asset‘ as (i) virtual tokens, (ii) virtual financial assets, (iii) electronic money or (iv) financial instruments. To qualify as DLT Assets, all such categories must be intrinsically dependent on or utilise the distributed ledger technology.
Further, the law defines ‘virtual financial assets‘ (VFAs) as any form of digital medium recordation that is used as a digital medium of exchange, a unit of account, or store of value and that is not electronic money, a financial instrument or a virtual token.
‘Virtual tokens‘ are a form of digital medium recordation whose utility, value or application is restricted solely to the acquisition of goods or services, either solely within the DLT platform or in relation to which it was issued or within a limited network of DLT platforms.
Switzerland considers ‘virtual currencies‘ as digital representations of value which can be traded on the Internet and although it takes on the role of money – it can be used as a means of payment for real goods and services.
Within the British regulatory framework, a ‘crypto-asset‘ is a cryptographically secured digital representation of value or contractual rights that uses some type of DLT and can be transferred, stored or traded electronically.
Do you want to launch a crypto-project but are unsure about the best jurisdiction for it? Get in touch with our experts today.