Utility Tokens, Markets in Crypto Assets Regulation (MiCAR), and the Costs of Being Public
17 Pages Posted: 11 Dec 2022 Last revised: 24 Jan 2023
Date Written: December 7, 2022
Digital platforms publicly offering utility tokens to consumers and investors or listing tokens on a trading platform within the EU need to comply with the “Markets in Crypto Assets Regulation” (MiCAR) beginning in 2024, which results in significant direct and indirect costs for issuers. The offering requires extensive mandatory disclosure of information in a white paper, resulting in significant financial consulting and legal fees for compliance, but minimizes litigation risk, and maximizes offering success. The listing requires continuous mandatory disclosure of insider information as a prevention of insider dealing and market manipulation, similar to issuers of financial securities in the EU. Due to the relatively high costs of being public, I expect only larger digital platforms to list their tokens. The regulation is a step in the right direction since it protects consumers and investors, and allows innovation by preventing token market failure due to a large fraction of fraud token issuers.
Keywords: Utility tokens, regulation, MiCAR, white paper, public token offering, market abuse
JEL Classification: G18, G32
Suggested Citation: Suggested Citation