New dimension for the International Token Classification framework to capture MiCA

The European Commission recently published a proposal for a regulation on Markets in Crypto-assets. The International Token Standardization Association has added a new dimension to its International Token Classification framework to classify tokens according to the proposal.

The European Commission recently published a proposal for a regulation on Markets in Crypto-assets, in short: MiCA. In its proposal, the European Commission seems to focus primarily on the definition of Pegged Payment Tokens (stablecoins) based on E-Money Tokens and Asset-Referenced Tokens. The International Token Standardization Association (ITSA) is using a different approach with regards to the Economic Purpose dimension. Hence, ITSA will add a new dimension to its International Token Classification (ITC) framework to classify tokens according to the MiCA proposal.

The dimension is titled “Regulatory Status EU (MiCA)” and is also the first regulatory dimension added to the ITC framework. This happens according to the ITC’s classification logic: The Economic Purpose dimension classifies the token’s intended use (economic), while the Regulatory Status EU dimension classifies the token according to regulatory standards, in this case within the EU. The overview of the new dimensions can be seen in Figure 1.

Figure 1: Overview of the International Token Classification framework Version 1.0

In the ITC, the dimension Economic Purpose classifies the usage of the token intended by the issuer. This dimension is divided into three categories: Payment Tokens, Utility Tokens, and Investment Tokens. MiCA appears to be focused on Pegged Payment Tokens, a sub-category within ITSA’s framework. Furthermore, MiCA seems to be lacking a clear differentiation between Unpegged Payment Tokens that are not categorized as E-Money or Asset-Referenced Tokens (e.g. Bitcoin, Litecoin) and Utility Tokens, as well as Investment Tokens that do not qualify as financial instruments. Additionally, MiCA is a proposal for regulation that is widely discussed and might be subject to change. Hence, ITSA opts to create a new dimension that can be adjusted in case of changes while the Economic Purpose dimension stays untouched.

The International Token Classification is a holistic standard framework for the classification of DLT- and blockchain-based cryptographic tokens according to their inherent characteristics. The first version of the ITC has already been applied to more than 800 cryptographic tokens and shall provide clarity and transparency for all market stakeholders involved. It follows a synoptical design based on the current research landscape as well as existing best-practices and builds on a flexible and extendable 360-degree approach, which employs different dimensions to describe a token’s properties. The ITC will soon be updated to version 1.0 and simultaneously introduce new dimensions for classification. A dimension for MiCA will be part of ITC’s version 1.0.

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Stefan Schmitt, Project Manager
Email: stefan.schmitt@itsa.global
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