Preamble Recitals

Requirements set out in Articles 45(1) of Regulation (EU) 2023/1114 also apply to electronic money institutionsmeans an electronic money institution as defined in Article 2, point (1), of Directive 2009/110/EC; issuing significant e-money tokens, in accordance with Article 58(1), point (a), of that Regulation, where required by the competent authoritymeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; under Article 35(4) of that Regulation, to issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-reference tokens that are not significant, and, where required by the competent authoritymeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; under Article 58(2) of that Regulation, to electronic money institutionsmeans an electronic money institution as defined in Article 2, point (1), of Directive 2009/110/EC; issuing non-significant e-money tokens.

Credit institutionsmeans a credit institution as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 and authorised under Directive 2013/36/EU;, investment firmsmeans an investment firm as defined in Article 4(1), point (2), of Regulation (EU) No 575/2013 and authorised under Directive 2014/65/EU;, undertakings for collective investment in transferable securities (UCITS management companiesmeans a management company as defined in Article 2(1), point (b), of Directive 2009/65/EC of the European Parliament and of the Council(33) Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).;) and alternative investment fonds managers (AIFM) that are issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant ARTs are to comply with the relevant more specific or stricter requirements set for those issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; in Directives 2013/36/EU(²)Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338, ELI: http://data.europa.eu/eli/dir/2013/36/oj)., (EU) 2019/2034(³)Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5.12.2019, p. 64, ELI: http://data.europa.eu/eli/dir/2019/2034/oj)., 2009/65/EC(⁴)Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32, ELI: http://data.europa.eu/eli/dir/2009/65/oj). and 2011/61/EU(⁵)Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1, ELI: http://data.europa.eu/eli/dir/2011/61/oj). of the European Parliament and of the Council, in addition to the requirements under Regulation (EU) 2023/1114 and this Regulation on governance arrangements for remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies. To achieve the objective of sound and effective risk management of issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced or e-money tokens, remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies should provide incentives for staffmeans all employees of an issuer of asset-referenced tokens or e-money tokens, and all members of such issuer’s management bodies; for long-term oriented risk-taking behaviour in line with the risk appetitemeans the aggregate level and types of risk that an issuer of asset-referenced tokens or e-money token is willing to assume within its risk capacity, in line with its business model, to achieve its strategic objectives; of issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced or e-money tokens and contribute to the protection of the holders of asset-referenced or e-money tokens.

Considering the similarities of the business model of issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced or e-money tokens with the business model of investment firmsmeans an investment firm as defined in Article 4(1), point (2), of Regulation (EU) No 575/2013 and authorised under Directive 2014/65/EU; that issue financial instrumentsmeans financial instruments as defined in Article 4(1), point (15), of Directive 2014/65/EU;, and in order to ensure a level playing field across the Union, it is necessary to set out a framework for governance arrangements on remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies that includes the same elements as the rules on remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policy applicable to investment firmsmeans an investment firm as defined in Article 4(1), point (2), of Regulation (EU) No 575/2013 and authorised under Directive 2014/65/EU;. However, this framework should be tailored to issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced and e-money tokens, whose business is different from the activity of issuing financial instrumentsmeans financial instruments as defined in Article 4(1), point (15), of Directive 2014/65/EU; by investment firmsmeans an investment firm as defined in Article 4(1), point (2), of Regulation (EU) No 575/2013 and authorised under Directive 2014/65/EU; or the performance of related investment services. This framework should aim at ensuring the same objectives as the remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. framework for investment firmsmeans an investment firm as defined in Article 4(1), point (2), of Regulation (EU) No 575/2013 and authorised under Directive 2014/65/EU; under Directive (EU) 2019/2034.

To ensure that remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies promote sound and effective risk management of the issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or of the electronic money institutionsmeans an electronic money institution as defined in Article 2, point (1), of Directive 2009/110/EC; issuing significant e-money tokens, do not provide incentives for excessive risk taking and are aligned with the long-term interests of those issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; across the European Union, it is necessary to specify the main aspects of the remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies to be applied by such issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; by taking into consideration and adapting the ones already existing under other sectoral legislations for entities acting on the financial market.

To ensure that the remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. framework provides no incentives to lower risk standards, specific requirements for the variable remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. of staffmeans all employees of an issuer of asset-referenced tokens or e-money tokens, and all members of such issuer’s management bodies; in control functionsmeans a function that is independent from the business units it controls and that is responsible for internal control procedures and includes the risk management, compliance and the internal audit functions; should be set to ensure that they are remunerated mainly based on control objectives while the remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies for all staffmeans all employees of an issuer of asset-referenced tokens or e-money tokens, and all members of such issuer’s management bodies;, including marketing or sales staffmeans all employees of an issuer of asset-referenced tokens or e-money tokens, and all members of such issuer’s management bodies; should provide no incentives for a preferential treatment of clientsmeans any natural or legal person to whom a crypto-asset service provider provides crypto-asset services; or counterparts.

In addition to the determination of an appropriate maximum ratio between variable and fixed remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation., it is appropriate for issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or electronic money tokensor ‘e-money token’ means a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency;, to impose additional requirements to align the variable remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. of staffmeans all employees of an issuer of asset-referenced tokens or e-money tokens, and all members of such issuer’s management bodies; that has a material impact on the risk profile of the issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens within the scope if this regulation or on the risk profile of the tokens they issue, so as to ensure that the variable remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. is linked to the risk adjusted performance of the issuermeans a natural or legal person, or other undertaking, who issues crypto-assets;, including by requiring the application of deferral arrangements, malus and claw back.

To ensure a proper risk alignment of the variable remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. awarded in instruments, the instruments awarded should consist of shares, share-linked or equivalent instruments or the significant tokens issued.

Environmental, social and governance (ESG) factors, including the adverse impact on the climate stemming from energy use and carbon footprint associated with the underlying information technology infrastructures and consensus mechanismsmeans the rules and procedures by which an agreement is reached, among DLT network nodes, that a transaction is validated; algorithms, used for the validation of transactions in blockchain systems, are relevant for issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-referenced or e-money tokens within the scope of this Regulation. ESG factors can affect the risk profile of such issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets;, its business model and the acceptance of their tokens. While climate and environmental factors are particularly relevant to the activities and services of such issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets;, other types of ESG factors such as tax transparency, human rights, employment conditions and adequate management of risks related to money laundering and other financial crimes are also relevant factors. It is therefore necessary that issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens within the scope of this Regulation ensure that their remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. policies are consistent with ESG risk-related objectives and take into account ESG risks and their possible adverse impacts. In particular, the variable remunerationmeans all forms of fixed and variable remuneration, including the following:monetary or non-monetary payments and benefits, awarded directly to staff by or on behalf of issuers of asset-referenced tokens or e-money tokens in exchange for professional services provided by staff;carried interest payments within the meaning of Article 4(1), point (d), of Directive 2011/61/EU;other payments made via methods and vehicles which, if they were not considered as remuneration, would lead to a circumvention of the remuneration requirements set out in Regulation (EU) 2023/1114 and in this Regulation. should be aligned to the ESG risk factors relevant for climate and other environmental impacts caused by the consensus and validation mechanisms used.

This Regulation is based on the draft regulatory technical standards developed by the European Supervisory Authority (European Banking Authority, EBA) in consultation with the European Securities Markets Authority and submitted by the EBA to the Commission.

EBA 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 opinion 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(⁶)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).,