Article 3 Conflicts of interest potentially detrimental to the holders of asset-referenced tokens

Article 3 complements Article 2 by shifting the focus of conflict of interest obligations from the issuer itself to the protection of asset-referenced token holders.

Where Article 2 addresses conflicts detrimental to the issuer, this article specifically targets conflicts that could harm the people holding those tokens.

It requires issuers to ensure their policies and procedures cover conflicts arising across the full lifecycle of the token, from issuance and processing through to redemption, as well as in the management of the reserve of assets.

It also introduces an assessment obligation around inducements, requiring issuers to examine whether they, their management body, or their employees are receiving monetary or non-monetary benefits from third parties in ways that could damage token holders' interests.

Important points:

• Ensure your conflict of interest policies and procedures specifically address situations where connected persons could benefit at the expense of token holders, across all stages of the token's lifecycle including redemption and reserve management.
• Assess whether inducements, in any form, are being received by the issuer, its management body, or employees from parties other than token holders, where those inducements may damage the interests of token holders.
• The dual focus of this article covers both direct financial gain by connected persons and situations where a connected person's interest in an outcome simply diverges from that of the token holder.