MiCA Review — Targeted Consultation Response

01 — Introductory Statement

The central argument of this response is that the consultation, while comprehensive in its technical questions, under-addresses the most consequential question facing EU digital asset policy: whether MiDA will be designed as infrastructure first and regulation second, with integration as a design condition from the outset, or whether it will repeat the architecture of MiCA — a well-drafted framework that has already begun reproducing the fragmentation it was built to prevent.

The Capital Markets Union has been on the EU agenda since 2015. Eleven years of directives, regulations, action plans and progress reports have produced a single market for capital that remains fragmented along national lines. Thirty-two CSDs. Fourteen CCPs. Twelve member states interpreting the definition of transferable security differently after twenty years of harmonisation attempts. The CMU failed because integration was attempted after national interests had already calcified around existing infrastructure. MiDA arrives before the digital asset market has fragmented in the same way. That window is open. It will not stay open.

MiDA's value is not in the quality of its rules. Every regulatory framework produces adequate rules by the time it passes. MiDA's value is in whether it builds integration into the architecture before fragmentation becomes the architecture — and whether it secures the sovereign infrastructure layer before the market settles on a private alternative that cannot be undone.

02 — Scope and Definitions

The way out is to stop regulating the asset and start regulating the service. Custody is custody whether the underlying is a utility token or a tokenised bond. Execution is execution in Frankfurt and Warsaw. The obligation flows from what the provider does to the client, not from what the underlying asset is called in national law.

A service-based framework dissolves the classification boundary problem because it does not depend on the classification. The CASP's obligations to its client are determined by the service delivered, not the instrument underneath. This is not a novel idea — it is how most of the rest of financial services law works. It has not been applied to digital assets at EU level. It should be.

Practical implication: MiDA should define the regulatory perimeter by service type — custody, execution, issuance, portfolio management, advice — and apply obligations accordingly. Asset classification remains relevant for issuance disclosure. It should not determine the regulatory treatment of services provided on top of already-issued assets.

03 — The Interest Prohibition

The prohibition did not protect euro monetary sovereignty. It funded Tether. Every euro of USDT in circulation is a euro of yield flowing to El Salvador rather than to the holder or the European financial system.

The inflation concern implicit in the consultation's framing is the self-correcting mechanism. A non-yielding token in an environment of positive real rates is held for immediate settlement and exited. Circulation remains thin. Thin circulation means no network effects. No network effects means euro stablecoins remain niche while USD instruments deepen their structural advantage. The prohibition reinforces the outcome it was designed to prevent.

The calibrated reform: lift the prohibition for EMTs where outstanding circulation exceeds a defined threshold (proposed: EUR 500 million, reviewable). Yield capped at the ECB deposit facility rate minus 50 basis points. Below threshold, current treatment applies — tokens remain pure payment instruments. Above threshold, yield flows to holders, circulation deepens, and the instrument the EU market needs becomes viable. Issuers at the threshold face a straightforward business decision: stay small and pay no yield, or scale and share the economics with holders. This is a proportionate mechanism, not a blanket permission.

The respondent flagged in the 2020 contribution that global stablecoins could severely impact monetary sovereignty and that the efficacy of national monetary policy measures would diminish as stablecoin diversification effects grew. The GENIUS Act, USDT's current $130+ billion circulation, and the Qivalis consortium's 37-bank effort to construct a competitive euro stablecoin have all confirmed this concern at scale. The consultation now has the opportunity to address the structural cause rather than its symptoms.

04 — Multi-Issuance and Global Stablecoins

Without an equivalence pathway, MiDA creates a walled garden that sophisticated participants route around rather than comply with. USDT will continue to circulate regardless of what MiDA says about multi-issuance. The question is whether EU-licensed alternatives can compete on equal terms with USD instruments, or whether MiDA's stablecoin provisions ensure they cannot.

05 — CASPs and Global Liquidity

06 — DeFi and Liability Capacity

Decentralisation is not a regulatory safe harbour. It is a bar to operating within the regulated perimeter — unless addressable assets exist that can discharge liability when a court order requires it.

Mechanisms that satisfy the liability capacity requirement: a legal person (standard corporate structure); a DAO treasury locked in a smart contract designated as a liability reserve, inaccessible to unilateral governance votes; an on-chain insurance pool maintained at a minimum level relative to TVL. The mechanism is open. The principle is not negotiable.

Precedent: Admiralty law has regulated ships as defendants — not their owners — for centuries. The principle that liability can attach to a res, an addressable asset, rather than to a specific legal person is not alien to law. It has simply not been applied to on-chain assets. MiDA can do this.

Practical implication: regulated intermediaries — CASPs, banks, investment firms — may connect clients to DeFi protocols only where addressable assets exist that a court can reach. Protocols without such assets remain accessible to sophisticated users acting on their own account. They do not belong in the regulated perimeter. On the consultation's certification proposals (Q63–65): certification schemes reduce information asymmetry and have disclosure value. They do not create accountability. A certified protocol that holds no addressable assets provides no recourse to a harmed client. Certification and liability capacity are complementary instruments, not substitutes for each other.

07 — Tokenised Deposits

The ECB's Pontes initiative, scheduled for pilot launch in Q3 2026, connects DLT platforms to TARGET Services and enables settlement of tokenised financial instruments in central bank money. This is the infrastructure that makes tokenised deposits viable at scale. The regulatory question for MiDA is whether the treatment of tokenised deposits under CRD/CRR and deposit insurance frameworks is calibrated to support their use in DLT settlement, or whether existing rules create friction that favours stablecoin workarounds over regulated bank money alternatives.

The consultation's CRD/CRR question (Q78) is the most consequential: if tokenised deposits are treated as contingent liabilities or off-balance-sheet instruments for capital purposes rather than as deposits, the regulatory capital treatment will disadvantage them relative to stablecoins. The MiDA framework should ensure that bank money in tokenised form receives the same regulatory treatment as bank money in traditional form, across both the issuing bank's balance sheet and the CASP's client asset treatment.

08 — Direct Issuer Access

An issue not explicitly raised in this section of the consultation but directly relevant to its scope: the CSD membership model is being replicated in tokenised form. DTCC's no-action letter governing its Canton Network tokenisation services requires all participants to be registered broker-dealers or DTCC member firms. Clearstream's Eurobond dematerialisation programme operates on the same principle. The paying agent and listing agent layer survives intact in every major tokenisation programme currently live or announced.

MiDA has the opportunity to answer this differently. An issuer with a smart contract can, in principle, manage its own cap table, run its own creation and redemption process, distribute payments directly to token holders, and eliminate the paying agent fee entirely. That disintermediation is technically achievable but legally impermissible under current frameworks, which require CSD membership as the condition for securities settlement participation.

MiDA should establish a direct issuer-operator category — an entity meeting defined AML, KYC, capital adequacy, and operational resilience requirements — that may create, redeem, and manage tokenised securities without CSD membership. The paying agent and listing agent layer should be optional for qualifying issuers, not a structural requirement of the framework.

Liechtenstein's TVTG already permits this: a token issuer can be its own register holder, taking on the obligations the CSD currently holds without becoming a CSD member. Failing to create an equivalent EU category replicates thirty years of intermediation costs in digital form and forfeits the disintermediation opportunity that justifies building the infrastructure at all.

09 — Token Property Law

Model 3 — functional approach (digital entitlement). The functional approach specifies the legal consequences of ledger entries without requiring harmonisation of underlying property law. The person recorded as holder may exercise the rights; those rights have full third-party effect (erga omnes); competing claims are defeated by priority of recording. This is the right framework architecture because it is the only model that produces cross-border enforceability without requiring the harmonisation of 27 national property law regimes — a task that has never been achieved for traditional securities and will not be achieved for tokens.

Model 4 — container model (for non-native tokens). The token as legal container for rights stemming from an underlying asset — ownership, membership, IP rights, liens — with transfer of the token on the ledger legally transferring the rights the token carries. Better suited to non-native tokens: tokenised bonds, fund units, equity representations, tokenised real-world assets including royalty streams. The two models are complementary, not competing.

The respondent recommended examination of Liechtenstein's blockchain act in the 2020 consultation. That recommendation was not followed in MiCA's design. The TVTG has now been in operation since 2020 — six years of live application. It uses precisely the Model 4 logic for token definition and Model 3 logic for the legal consequences of ledger entries. It works.

The EU has an EEA member state that has built and operated the token property law regime for six years. The argument that EU-level harmonisation is technically impossible is directly contradicted by a jurisdiction that has done it. The question is political will, not technical feasibility.

On the 28th regime: the respondent supports establishment of a 28th regime for token property law — an EU-level rule operating alongside national property law regimes, specifically governing the issuance, holding and transfer of tokens as defined in MiDA. This does not require harmonisation of national property law. It requires an EU regulation that specifies: (1) what constitutes a valid token issuance; (2) how token ownership is established and evidenced; (3) what erga omnes effects attach to recorded ownership; (4) how competing claims are resolved. Liechtenstein has written this regulation. It is 40 pages. The legal complexity is manageable. The political complexity is the actual obstacle.

On conflicts of law (Q84): the connecting factor for token property law should be the law of the state under whose supervision the DLT register is maintained, with a fallback to the issuer's home jurisdiction. This provides certainty for institutional participants without requiring the ledger itself to have legal personality. The UNIDROIT Principles on Digital Assets and Private Law provide the analytical framework. The consultation should engage with them directly.

10 — Kraftloserklärung — a Structural Gap

Current squeezeout provisions — Kraftloserklärung under German and Austrian company law, compulsory acquisition under Article 15 of the EU Takeover Directive — assume traceable minority shareholders who can be served notice and compensated. Tokenised equity introduces a category of irrecoverable minority position that these procedures cannot reach: permanently lost tokens, where the private key is inaccessible, the holder is deceased without estate documentation, or the wallet address is destroyed.

A majority acquirer holding 98% of a tokenised company cannot achieve clean title if 2% of tokens are permanently inaccessible — regardless of economic reality. The blocking position is held by nobody. It cannot be bought out, voted, or extinguished under any current EU member state's company law. The acquirer is frozen at 98% by a ghost position, indefinitely, with no legal remedy available.

MiDA should establish a shortened compulsory acquisition procedure for demonstrably inactive token positions beyond a defined dormancy threshold — ten years is a defensible starting point — with consideration deposited in a permanent escrow accessible to any future claimant establishing original ownership.

Without this, tokenised equity is structurally inferior to traditional shares for M&A purposes. That deficiency will deter institutional adoption regardless of how well the rest of the framework is designed. This is a genuine legislative innovation that does not exist in any EU member state's company law. It belongs in MiDA as a complement to the token property law regime, and its absence from the consultation's 85 questions is the single most consequential gap in the document. The lost private key problem was flagged as a disclosure item in the 2020 contribution (Q83.1); it is restated here as the structural legal problem it has since proven to be.

11 — The Infrastructure Question

The malign scenario for European digital asset infrastructure is a foreign conglomerate providing the settlement and classification layer, extracting fees from every transaction, and holding the data that maps European corporate ownership, institutional positioning, and on-chain asset flows across the continent. That is not commercial data. It is strategic intelligence.

This is not hypothetical. Deutsche Boerse's D7 DLT platform — built with Google Cloud, integrated with its own 360X trading venue, CSDR-compliant, live since late 2025 — is already a candidate for pan-European digital securities infrastructure. It is private, shareholder-owned, and partially hosted on US hyperscaler cloud. More significantly: DTCC — which custodies $114 trillion in securities — will begin production trades of tokenised securities on the Canton Network in July 2026, with full platform launch in October. More than fifty institutional firms including BlackRock and JPMorgan are already participating. Euroclear, one of Europe's two dominant CSDs, co-chairs the Canton Foundation's governance alongside DTCC. Clearstream, Euroclear, and DTCC have jointly published interoperability standards for tokenised settlement, establishing the protocol architecture without a public institution at the table. If MiDA is silent on infrastructure governance, this architecture becomes the standard — not because it is designed for Europe's interests, but because it is already operational.

The ECB's Appia initiative is the sovereign alternative — a ground-up design of a tokenised wholesale financial ecosystem, blueprint due 2028, explicitly framed as reducing European dependence on foreign infrastructure. Pontes is the short-term bridge. But Appia will not outbuild Deutsche Boerse on product delivery timelines. That is not the right comparison. The ECB's role is to define the protocol that determines what operating in the EU market requires — not to compete on feature velocity with a private exchange operator. The GSM standard did not compete with Nokia. It set the terms Nokia had to meet.

MiDA should designate Appia as the reference infrastructure for the EU digital asset market, making connection to the sovereign layer the condition for regulatory advantages: passporting, reduced capital requirements, sandbox access, EIB support. The ECB sets the terms. The market builds the product.

The fallback if Appia is buried — and the history of the Giovannini Group's 2001 and 2003 recommendations on EU clearing and settlement integration should counsel against optimism — is mandatory interoperability written into MiDA as primary law: any DLT infrastructure operating in the EU market connects to Eurosystem settlement, publishes open APIs, and cannot restrict access to competing platforms. The ECB does not need to run the infrastructure. It needs to ensure nobody else can capture it. Rules can be quietly shelved. Primary law requiring open interoperability is structurally harder to reverse once enacted.

The contrast with the UK is instructive. On 15 May 2026 — three days before this consultation launched — the FCA and the Bank of England published a joint vision for tokenisation in UK wholesale markets. Two regulators, one document, naming infrastructure and regulation as co-equal questions requiring a shared institutional answer. A joint ECB/Commission equivalent does not exist. Appia and MiDA are being developed in parallel by different institutions on different timescales. That gap is not incidental. It is structural.

The deeper point is about timing. The CMU failed because it attempted retrofitted integration — harmonising markets after national interests had already calcified. MiCA is already reproducing this pattern: 170 CASPs across 18 member states, each authorised under subtly different NCA interpretations of the same regulation. MiDA arrives before the digital asset market has fragmented along national lines. There are no 32 digital asset CSDs with 32 sets of incumbents defending 32 sets of switching costs. The Giovannini Group made the case for integrated EU clearing and settlement infrastructure in 2001. The Draghi report made it again in 2024. The pattern is that the case is made, the window closes, and the next generation of policymakers makes the case again. MiDA is the last instrument that can break that cycle for digital asset markets.

— Summary of Positions

Positions argued in August 2026

• Q1–2 — MiCA/MiFID boundary. Regulate the service, not the asset. Dissolves the classification boundary problem without requiring a harmonised taxonomy that twenty years of EU law has failed to produce.
• Q12 — Zero ARTs licensed. The ART regime was designed for a Libra-type threat that did not materialise. It actively discourages the instrument the market needs. Reform reserve and interest rules before concluding there is no market interest.
• Q20 — Interest prohibition. Lift for euro EMTs above EUR 500m circulation, capped at the ECB deposit facility rate minus 50bps. The numbers suggest the prohibition has benefited non-EU actors more than EU monetary stability.
• Q29–30 — Multi-issuance and global stablecoins. Prohibition is ineffective. Calibrated reserve location requirements plus a genuine equivalence regime for substantively comparable third-country frameworks. Restriction without equivalence drives activity offshore.
• Q56 — CASPs and global liquidity. The question is infrastructure governance, not rule text. A CASP on fragmented private infrastructure faces structural disadvantage regardless of what MiDA permits.
• Q62–65 — DeFi liability. Liability capacity, not decentralisation degree, is the threshold. Addressable on-chain assets — legal person, DAO treasury, insurance pool — satisfy the requirement. No liability capacity, no regulated perimeter access for intermediaries.
• Q74–79 — Tokenised deposits. The institutional alternative to USD stablecoin dominance. Ensure CRD/CRR and deposit insurance treatment does not disadvantage bank money in tokenised form relative to stablecoins.
• Q74–79 (supplementary) — Direct issuer access. Establish a direct issuer-operator category meeting defined AML/KYC/capital requirements, permitting tokenised securities creation and redemption without CSD membership. Paying agent layer optional, not mandatory.
• Q80–84 — Token property law. Model 3 as framework architecture (erga omnes digital entitlement). Model 4 for non-native tokens (container model). 28th regime. Liechtenstein TVTG is the proof of concept. Build it.
• Q80–84 (continued) — Kraftloserklärung. Establish a shortened compulsory acquisition procedure for permanently inactive token positions beyond a defined dormancy threshold, with consideration in permanent escrow. Without this, tokenised equity is structurally inferior to traditional shares for M&A.
• Q86 — Infrastructure governance. Appia as reference infrastructure — connection to the sovereign layer as the condition for EU regulatory advantages. Euroclear, DTCC and Clearstream are already setting interoperability standards without a public institution present. Mandatory interoperability as primary law fallback if Appia is delayed.

— A Note on Method — the Inheritance Test

Several recommendations in this response share a common logic: the MiCA/MiFID boundary treatment in Part 1, the economic substance reasoning behind the interest prohibition position in Part 2, and the token property law architecture in Part 4. The respondent has formalised that logic separately as an open methodology, the Inheritance Test, published under CC BY 4.0 without trademark or commercial restriction. Its central proposition: a wrapper inherits the properties of its underlying and cannot bestow properties the underlying lacks, assessed through three gates — economic (does the instrument transform liquidity, risk, or marketability), legal (in-rem right or contractual claim), and jurisdictional (does the registration layer deliver recognised finality and an identifiable ownership locus). The methodology is wrapper-agnostic, applying identically to CSD book-entries, manual registers, and tokens.

Each gate maps to a question this consultation raises without a shared organising framework — the economic gate to reserve composition and the interest prohibition, the legal gate to the financial instrument boundary and token property law, the jurisdictional gate to equivalence, multi-issuance, and conflict of laws. A classification principle organised around what a constraint actually is, rather than around asset taxonomy, may offer a reusable diagnostic across the classification questions this consultation poses individually. Full documentation is available at juliangretzinger.com/inheritance-test for the Commission's reference, without restriction on use or adaptation.