Art. 2 Policies and procedures for identifying, measuring and managing liquidity risk | RTS on liquidity management policy | MiCA

This is the core substantive article of the regulation, laying out the detailed requirements for what liquidity management policies and procedures must actually contain and achieve.

It addresses issuers of asset-referenced tokens and e-money tokens, covering everything from the overarching obligation to maintain adequate reserve assets for redemptions at all times, to specific operational requirements around intra-day liquidity management, custodian oversight, and concentration risk.

Notably, the management body of the issuer carries direct responsibility for approving these policies and setting risk tolerance levels for each token.

The article also connects to Article 37 of Regulation (EU) 2023/1114 regarding the appointment of custodians of reserve assets, meaning obligations in that parent regulation feed directly into the monitoring duties established here.

Important points:

Implement liquidity management policies and procedures that ensure reserve assets are sufficient to meet redemption requests at all times, including under stress scenarios.
The management body of the issuer must formally approve the liquidity management policies and set risk tolerance levels for each individual token issued.
Establish internal limits to avoid custodian concentration risk, and regularly monitor custodian appointments, custody policies, and related contractual arrangements.

1. The liquidity management policies and procedures shall include robust strategies, and processes for the identification, measurement, management, monitoring and internal reporting of liquidity risk over a set of time horizons appropriately reflecting that risk.
1. The liquidity management policies and procedures shall ensure that adequate levels of reserve assets are maintained to meet requests for redemption by holders of asset-referenced tokens or e-money tokens at any moment, including under stress scenarios.
1. The liquidity management policies and procedures shall be proportionate to the complexity, risk profile and scope of operation of the issuers of asset-referenced tokens or e-money tokens.
2. The management bodies of the issuers of asset-referenced tokens or e-money tokens shall approve the liquidity management policies and procedures and shall set risk tolerance levels to each asset-referenced token or e-money token.
3. The liquidity management policies and procedures shall reflect the current and expected liquidity risks of issuers of asset-referenced tokens or e-money tokens.
4. The issuers of asset-referenced tokens or e-money tokens shall monitor those risks on an ongoing basis. That monitoring shall include the following:
  1. identification of deposits with credit institutions, of the highly liquid financial instruments and of any other reserve assets;
  2. the setting of the criteria to determine the market value of the reserve assets;
  3. the assessment of concentration risk, creditworthiness and liquidity soundness, as well as the limits and time horizons of such risks, and the currencies’ consistency;
  4. the techniques for ensuring the stability of the reserve of assets’ value with respect to the referenced assets.
1. Issuers of asset-referenced tokens or e-money tokens shall establish arrangements for sound management of the intra-day liquidity risk. Those arrangements shall include the following:
  1. the identification of the expected intra-day liquidity needs and resources;
  2. the setting up of processes and procedures coherent with the profile of the issuer of the asset-referenced token or e-money token and the contingent and expected market situation.
1. Issuers of asset-referenced tokens or e-money tokens shall monitor their reserve assets to ensure that they are available to cover the value of the assets referenced by such tokens at all times, including during emergency situations, and shall assess the appropriateness of overcollateralisation, in particular where the assets referenced by the tokens are highly volatile or do not form part of the reserve of assets.
1. Issuers of asset-referenced tokens or e-money tokens shall monitor, on a regular basis, the appointment of custodians of reserve assets as referred to in Article 37 of Regulation (EU) 2023/1114, the custody policies and the related contractual arrangements.
1. Issuers of asset-referenced tokens or e-money tokens shall have in place specific measures and shall establish internal limits to avoid concentration of the reserve of assets by a custodian.
1. Issuers of asset-referenced tokens that reference at least one asset that is not an official currency shall establish processes and procedures to address risks arising from cases in which the reserve of assets are not composed by the assets referenced, including arrangements for managing risks arising from the use of derivative instruments or instruments tracking the referenced assets.