RTS on issuer conflicts of interest

The reserve of assets is a key element of asset-referenced tokens, and its sound management contributes to the protection of holders of asset-referenced tokens. When identifying, preventing, managing and disclosing conflicts of interest, issuers of asset-referenced tokens should take into account the potential conflicts of interest arising from the management and investment of the reserve of assets referred to in Article 36 of Regulation (EU) 2023/1114 and the policies and procedures of the issuers of asset-referenced tokens should cover those aspects. Similarly, issuers of asset-referenced tokens should take into account the potential conflicts of interest with third parties that provide services related to the operating, the investment or the custody of the reserve assets and, where applicable, the distribution of the asset-referenced tokens to the public. For the same reason, issuers of asset-referenced tokens should establish, implement and maintain arrangements to ensure that the third party, that provides one of the functions as referred in Article 34(5), point (h) of Regulation (EU) 2023/1114 acts in a manner consistent with their conflicts of interest policies and procedures.

In their conflict of interest policies and procedures under Article 32(1) of Regulation (EU) 2023/1114, issuers of asset-referenced tokens should take into consideration the actual and potential conflicts of interest which affect or potentially affect the interests of holders of asset-referenced tokens as well as the interests of the issuer of asset-referenced tokens, including conflicts of interest which may affect its performance and situation and thus, indirectly, also the interests of holders and prospective holders of asset-referenced tokens.

In order to ensure that the interests of the holders, prospective holders and issuers of asset-referenced tokens are sufficiently protected, the issuer of asset-referenced tokens should assess and evaluate any actual and potential conflicts of interests and establish and implement appropriate measures to prevent or mitigate them at the earliest stage possible.

Transactions that are exchanges of asset-referenced tokens for funds or other crypto assets including redemption of asset-referenced tokens where the issuer of the asset-referenced token is one of the parties of the transaction, carry a heightened risk of conflicts of interest and therefore should be carefully assessed as to whether they can be detrimental to the issuer of the asset-referenced token, where the transactions are carried out on behalf of persons directly or indirectly connected to the issuer of the asset-referenced token itself.

Similarly, as the incentives foreseen in the remuneration procedures, policies and arrangements may give raise to conflicts of interest, they should be monitored to prevent any distortive application, which would be detrimental to the issuer or the holders of asset-referenced tokens.

In order to prevent conflict of interests detrimental to the issuer of asset-referenced tokens, the policies and procedures under Article 32(1) of Regulation (EU) 2023/1114 should ensure the careful monitoring of situations where persons connected to issuers of asset-referenced tokens have a personal, professional or political relationship with another person that has interests conflicting with those of the issuer. Such relationships have the potential to influence objectivity or judgement of issuers of asset-referenced tokens and their connected persons. Personal relationships should include those between relatives by blood or marriage, or social relationships not limited to a formal partnership or marriage. Political relationships should include memberships of political parties, or relationships with government or other public officials. Professional relationships should consist in relationships in a professional setting, such as at work or in a business context.

To ensure trust in the issuer of asset-referenced token as well as to protect that issuer from reputational damage or legal risks, in circumstances where risks of conflicts of interest are particularly significant and cannot be appropriately prevented or managed through the adopted policies and procedures including internal systems and controls, other additional specific measures should be decided on and put in place to prevent or manage the relevant conflicts of interest.

For the purpose of ensuring at all time their appropriate implementation, maintenance and review, the conflict of interest policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114, should ensure that there are sufficient resources available for the management of the conflicts of interest and that human resources managing the conflicts of interest at the issuer of asset referenced tokens are independent from the business functions of the issuer. Such dedicated human resources should also have the necessary skills, knowledge and expertise. The person responsible for the management of conflicts of interest should be able to access and report directly to the management body in its management function and, where applicable, in its supervisory function. To ensure efficient allocation and management of resources dedicated to the management of conflicts of interest, the policies and procedures should foresee that the person responsible for the management of conflicts of interest is able to commit sufficient time to this role and that the person has available sufficient resources at all times for an appropriate implementation, application, monitoring and review of those policies and procedures.

To ensure that holders and prospective holders of asset-referenced tokens can take an informed decision about the asset-referenced-tokens, issuers of asset-referenced tokens should keep the information disclosed to the holder of asset-referenced tokens in accordance with Article 32(3) of Regulation (EU) 2023/1114 up to date and provide a description of the identified conflicts of interest and the measures taken to manage or prevent conflicts of interest.

In order to make clear to holders of asset-referenced tokens in what capacity or capacities the issuer of asset-referenced tokens is acting, especially as it may often be operating in close cooperation with affiliated entities or entities of the same group, the information referred to in Article 32(3) of Regulation (EU) 2023/1114 should include a sufficiently detailed, specific and clear description of the situations which give or may give rise to conflicts of interest, including the role and capacity in which the issuer of asset-referenced tokens is acting and whether the issuer of asset-referenced tokens is part of a group comprising also crypto asset service providers.

For the same reason, as well as to ensure appropriate investor protection, holders and prospective holders of asset-referenced tokens should have access to the information referred to in Article 32(3) of Regulation (EU) 2023/1114 in a language with which they are familiar. Therefore, issuers of asset-referenced tokens should make such information available in an official language of the home Member State as defined in Article 3(1), point (33)(d), of Regulation (EU) 2023/1114 and in a language which is customary in the sphere of international finance. At the time of adoption of this Regulation, English is the customary language in the sphere of international finance but that could evolve in the future.

The processing of personal data, including information collected for the purposes of the conflict of interest policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114, by issuers of asset-referenced tokens should be carried out in compliance with the right to protection of personal data of the persons concerned, as set out in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union and must comply with Regulation (EU) 2016/679 of the European Parliament and of the Council(²)Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1, ELI: http://data.europa.eu/eli/reg/2016/679/oj)..

The conflict of interest policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 as further specified in the regulatory technical standards set out in this Regulation should provide for the communication of personal data when necessary and proportionate to ensure the adequate identification, prevention, management and disclosure of conflicts of interest potentially detrimental to the holders of asset-referenced tokens or to the issuers of asset-referenced tokens, taking into account the fundamental rights to privacy and to the protection of personal data of the connected persons. In line with the principle of data minimisation as laid down in Regulation (EU) 2016/679, the issuers of asset-referenced tokens should specify which categories of personal data they will process to identify, prevent and manage conflicts of interest in their policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114, in a way appropriate to their size and internal organisation, to the group where applicable, their business model, suitable for the nature, scale and complexity of their activities. The regulatory technical standards set out in this Regulation specify the criteria to identify categories of personal data that are necessary and proportionate to ensure the adequate identification, prevention, management and disclosure of conflicts of interest potentially detrimental to the holders or issuers of asset-referenced tokens, having regard to the risks to the fundamental rights to privacy and to the protection of personal data of the persons referred to in Article 32(1), points (a) to (d) and point (f), of Regulation (EU) 2023/1114.

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority.

The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council(³)Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12, ELI: http://data.europa.eu/eli/reg/2010/1093/oj).,

The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 of the European Parliament and of the Council(⁴)Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39, ELI: http://data.europa.eu/eli/reg/2018/1725/oj). and delivered an opinion on 17 July 2024,