The status of index tokens: an illustration of financial instruments’ incursion into MiCAR definitions

Abstract The article explores the problem of delineation between cryptoassets falling within the MiCAR purview and those qualifying as financial instrument category, and simultaneously pursues several goals in this respect. First, the article draws attention to the way in which exemptions from Article 2(4) MiCAR affect the MiCAR definitions of tokens, and illustrates it with the interaction between the asset-referenced tokens (ARTs) and financial instruments definitions. In this respect, the analysis shows how the ART definition, despite its apparently extremely wide scope, is subject to quite extensive limitations derived from Article 2(4) MiCAR. Second, the article deals with the proper deconstruction of the transferable securities definition. In this respect, it is argued that the comparability test of novel assets with traditional financial instruments should be divided into two levels, that is, the general leg and the particular leg. The general comparability is derived from the part of Article 4(1)(44) MiFID, which refers to negotiability on the capital markets, when read with Recital 8 of MiFID II, and covers the investment, contractual, and credence-based nature of the asset. The particular test stems from illustrative examples from points (a) to (c) of Article 4(1)(44) MiFID II, and has only a subsidiary character. The whole analysis is carried out from the perspective of index tokens, that is, tokens following prices of crypto indexes or select baskets of assets, which provide for a convenient basis to pursue the above-mentioned objectives. In conclusion, it is stated that index tokens should generally qualify as transferable securities.