Environmental protection has been one of the key topics discussed publicly in recent years. Growing public awareness and increasing sensitivity to environmental issues have not gone unnoticed by businesses and lawmakers alike.
To encourage customers to use their services or products, businesses have begun adopting a more eco-friendly approach to distinguish themselves from their competitors. Legislative bodies, both national and EU, recognizing the growing societal trend toward environmental protection, have decided to develop a legal framework aimed at enforcing a more eco-friendly approach among society.
The idea of promoting sustainable development and the environment has also been implemented in the MiCA (Market in Crypto-Assets) regulation, imposing certain obligations on crypto-asset issuers and crypto-asset service providers (CASPs).
Sustainability and environmental regulations at MiCA
When examining the MiCA Regulation in the context of sustainable development and environmental protection, one encounters several provisions that address this issue in general. The EU legislator has adopted an approach in which sustainability and environmental issues will be addressed more broadly in regulatory technical standards, the development of which was entrusted to ESMA (European Securities and Markets Authority).
The MiCA regulation itself introduces disclosure requirements related to the principal adverse climate and other adverse environmental impacts of consensus mechanisms used to issue cryptoassets, as part of the Whitepaper. This applies to the issuance of asset-linked tokens (ARTs), electronic money tokens (EMTs), and cryptoassets other than ARTs and EMTs.
MiCA imposes a similar requirement on CASPs, requiring them to publish on their websites information related to the principal adverse climate impact and other adverse environmental impacts of the consensus mechanism used to issue each crypto-asset for which they provide services.
Draft Regulatory Technical Standards (RTS)
At the time of writing, ESMA has issued draft regulatory technical standards addressing sustainability and environmental protection in the context of crypto-asset issuance and the provision of crypto-asset services.
In line with ESMA's approach, the proposed regulations aim to provide appropriate context and investor awareness through mandatory disclosure of information on adverse climate and other environmental impacts. The disclosures should include a section providing general information on cryptoassets and the characteristics of consensus mechanisms, a mandatory key indicator for energy consumption and, where applicable, additional key indicators for energy and greenhouse gas emissions, as well as a section on the sources and methodologies used to calculate these key indicators.
RTS and the issuance of cryptoassets
The RTS project regarding the issuance of crypto-assets requires that the Whitepaper regarding a given crypto-asset include, among others:
- information on the total amount of energy used to validate transactions and maintain the integrity of the distributed transaction ledger, expressed per calendar year;
- where the amount of energy consumed exceeds 500,000 kWh, the issuer must also provide information on renewable energy consumption, energy intensity and greenhouse gas emissions;
- Optionally, issuers can also provide information on, among others: energy mix, reduction of energy consumption or CO2 emissions.
RTS and CASP
Under the proposed regulations, CASPs will be required to make publicly available on their website information on the principal adverse climate and other adverse environmental impacts resulting from the consensus mechanism used to issue crypto-assets, with respect to the crypto-assets for which they provide services.
Additionally, CASPs make available on their website information regarding the crypto-assets for which they provide services, information on renewable energy consumption, energy consumption intensity and greenhouse gas emissions, if the following conditions are cumulatively met:
- A CASP provides at least one of the following services: operates a crypto-asset trading platform, exchanges crypto-assets for cash, or exchanges crypto-assets for other crypto-assets;
- annual energy consumption exceeds 500,000 kWh for the crypto-asset for which CASP provides services.
This alert is for informational purposes only and does not constitute legal advice.
Legal status as of October 3, 2024
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