Re: EBA Opinion EBA/Op/2025/08 - Interplay between PSD2 and MiCA regarding Electronic Money Token Services - Request for Regulatory Clarity
Dear Members of the Authority,
We write on behalf of our client portfolio at Axis Advisory particularly, in relation to clients seeking authorisation as a Crypto-Asset Service Provider ("CASP") under Regulation (EU) 2023/1114 ("MiCA"), to express our serious concerns regarding the European Banking Authority's ("EBA") Opinion EBA/Op/2025/08 dated 10 June 2025 ("the Opinion") and its potential implementation in Malta.
Specifically, we seek urgent clarification regarding the EBA's recommendation that National Competent Authorities ("NCAs") should "prevent entities that are not licenced as a PSP or have not entered into a partnership with a PSP, from providing services related to EMTs that qualify as a payment service" after 1 March 2026.
This recommendation creates significant practical and legal challenges that threaten to undermine the viability of Electronic Money Token ("EMT") services in Malta and across the European Union, potentially stifling innovation in the digital assets sector while creating regulatory uncertainty for legitimate market participants.
On 10 June 2025, the EBA issued Opinion EBA/Op/2025/08 in response to the European Commission's request of 6 December 2024 to clarify the regulatory interplay between MiCA and Directive (EU) 2015/2366 ("PSD2") concerning CASPs that transact EMTs.
The Opinion establishes a transitional framework until the implementation of PSD3/PSR, advising NCAs to:
Under MiCA Article 48(2), EMTs are deemed to be electronic money and therefore fall within the definition of "funds" under PSD2 Article 4(25). This dual nature creates regulatory overlap where certain CASP services involving EMTs may simultaneously trigger both MiCA and PSD2 requirements.
MiCA Article 70(4) acknowledges this overlap, providing that CASPs intending to provide payment services related to their crypto-asset services may either: (i) obtain relevant authorisations themselves, or (ii) partner with an authorised PSP.
The EBA Opinion establishes that EMTs, by virtue of their classification as electronic money under MiCA Article 48(2), constitute "funds" within the meaning of PSD2 Article 4(25). This creates a legal bridge between the crypto-asset and payment services regulatory frameworks.
The Opinion further clarifies that EMTs possess a "dual nature," being simultaneously:
This dual classification triggers several regulatory consequences:
Capital Requirements: The EBA advises that initial capital requirements under both PSD2 and MiCA apply cumulatively, with the Opinion providing an example where a CASP offering both custody services and payment services would require EUR 250,000 in minimum capital (EUR 125,000 under each regime).
Safeguarding Obligations: While the EBA advises NCAs not to prioritise enforcement of PSD2 safeguarding provisions given MiCA's specific safekeeping requirements under Article 70, the underlying dual obligation remains.
Consumer Protection: EMT services qualifying as payment services become subject to PSD2 Titles III and IV, albeit with de-prioritised enforcement of certain provisions due to technical specificities of distributed ledger technology.
The Opinion establishes that the following EMT-related services qualify as payment services under PSD2:
Transfer Services: Transfer of crypto-assets as defined under MiCA Article 3(1), point 26, constitute payment services where they:
Custody and Administration: The custody and administration of EMTs qualify as payment services, and custodial wallets constitute payment accounts under PSD2 where they:
Notably, the Opinion excludes certain activities from payment service classification:
The EBA adopts a functional approach to defining payment accounts, consistent with CJEU Case C-191/17, requiring that custodial wallets:
The EBA's partnership recommendation creates a fundamental regulatory contradiction that renders compliance practically impossible:
The Core Problem: Since EMTs are definitionally crypto-assets under MiCA Article 3(1), point 5, any PSP providing custody services for EMTs must also obtain CASP authorisation under MiCA for "providing custody and administration of crypto-assets on behalf of clients" as defined in Article 3(1), point 17.
Circular Requirements: This creates a regulatory loop where:
Our market research reveals a critical shortage of suitable PSP partners in the EU that possess both:
The few institutions that might theoretically qualify face their own regulatory uncertainties and compliance burdens under the dual regime, making them reluctant to enter partnership arrangements.
Infrastructure Incompatibility: Traditional PSP infrastructure is not designed for distributed ledger technology operations, creating technical barriers to meaningful partnerships.
Risk Management: PSPs face significant operational and regulatory risks in handling crypto-assets, particularly given the evolving regulatory landscape and enhanced scrutiny from financial regulators.
Commercial Viability: The compliance costs and operational complexity of dual-regime compliance make many potential partnerships commercially unviable.
The Opinion acknowledges that MiCA "is not explicit about which of the services that CASPs may offer qualify as payment services," creating interpretive challenges for market participants and NCAs alike.
This uncertainty is compounded by the EBA's admission that the Opinion "covers only the major issues" and "does not assess each of the 250 Articles across the two texts individually," leaving significant gaps in regulatory guidance.
The EBA explicitly acknowledges that its recommendations are "driven solely by the acknowledgement that any alternative advice would require these CASPs to obtain a second authorization, which is undesirable because the compliance burden that arises for legal entities would be disproportionate."
Despite this acknowledgement, the recommended approach still imposes disproportionate burdens on CASPs while failing to achieve the stated policy objectives of consumer protection and market integrity.
MiCA was designed to provide regulatory clarity and facilitate innovation in crypto-asset markets. The dual authorisation requirement contradicts these objectives by:
The practical impossibility of compliance threatens to:
Given the significant challenges outlined above, we respectfully request that the Malta Financial Services Authority provide clear guidance on the following matters:
Question 1: How does the MFSA intend to implement the EBA Opinion's recommendations, particularly the 1 March 2026 deadline for preventing non-compliant entities from providing EMT services?
Question 2: Will the MFSA exercise regulatory discretion in applying the Opinion's recommendations, given the acknowledged practical difficulties and the EBA's own characterisation of the framework as temporary and "undesirable"?
Question 3: What specific criteria will the MFSA apply to determine whether a PSP partnership arrangement satisfies the requirements outlined in the Opinion?
Question 4: How will the MFSA address the circular authorisation problem where PSPs providing EMT custody services require CASP authorisation?
Question 5: Will the MFSA maintain a registry of approved PSP partners for CASPs, and if so, what will be the qualification criteria?
Question 6: Will any relief measures, if any, be available for CASPs that demonstrate good faith efforts to comply but cannot secure appropriate PSP partnerships due to market limitations?
Question 7: Will the MFSA be setting up any streamlined processes to support companies that are planning to submit a dual authorisation for a MiCA and PSP license?
Question 8: Given that numerous CASPs have already submitted applications and developed business plans with specific launch timelines in anticipation of MiCA authorisation, and that pausing operations to pursue dual authorisation are likely to require an additional 6+ months and cause significant commercial disruption, will the MFSA establish streamlined processes to support entities seeking the subsequent PSP authorisation? Specifically, will the MFSA implement expedited review procedures, consolidated application processes, or other measures to minimise delays for applicants pursuing dual compliance in good faith?
Question 9: How will the MFSA determine which specific EMT-related services qualify as payment services requiring PSP authorisation or partnership?
Question 10: Will the MFSA provide detailed guidance on the application of the Opinion's recommendations to specific business models and service offerings?
The EBA Opinion, while well-intentioned in seeking to address regulatory gaps, creates practical impossibilities that threaten the viability of legitimate EMT services in Malta and across the EU. The circular authorisation requirements, combined with the lack of suitable PSP partners possessing both PSD2 and MiCA authorisations, renders compliance practically impossible for many market participants.
We respectfully submit that rigid enforcement of the Opinion's recommendations after 1 March 2026 would:
We therefore respectfully ask the MFSA to exercise appropriate regulatory discretion in implementing the Opinion's recommendations and to provide clear, practical guidance that enables legitimate market participants to continue operating while maintaining appropriate consumer protections.
We committed to full regulatory compliance and would welcome the opportunity to discuss these matters further with the Authority. We believe that constructive dialogue between regulators and industry participants is essential to developing workable solutions that serve both regulatory objectives and market innovation.
