Token Compliance

Token Compliance

The Markets in Crypto-Assets Regulation (MiCA), Regulation (EU) 2023/1114, establishes a classification framework that determines the regulatory treatment of each digital asset. Every token in the fXYZ Network has been designed with these classifications in mind, ensuring that the technical architecture supports the intended regulatory category from the outset.

This page describes the classification analysis for each network token, the resulting white paper obligations, and the current status of compliance preparation.

MiCA Token Categories

MiCA defines several categories of digital assets, each subject to different requirements. The following categories are relevant to the fXYZ Network token ecosystem.

Utility Tokens (Title II)

Defined under Article 3(1)(9) as digital assets intended to provide access to a good or service supplied by the issuer. Subject to white paper notification requirements under Title II, unless an exemption applies.

Key exemption: Article 4(3)(c) provides that if the digital asset grants access to goods or services that already exist or are already in operation, the issuer may be exempt from the Title II white paper requirement. This exemption is narrowly construed and applies only when the underlying service is genuinely operational at the time of offering.

Asset-Referenced Tokens (Title III)

Tokens that maintain a stable value by referencing the value of several fiat currencies, one or more commodities, one or more other digital assets, or a combination thereof. Subject to significantly higher requirements including NCA authorization, capital requirements (starting at EUR 350,000), reserve asset custody, and redemption rights.

E-Money Tokens (Title IV)

Tokens that reference a single official currency. Issuers must hold an electronic money institution (EMI) license under Directive 2009/110/EC. Subject to the most stringent reserve and redemption requirements.

Other Crypto-Assets (Title II)

Digital assets that do not fall into the utility, ART, or EMT categories. Subject to the same Title II white paper notification regime as utility tokens.

Financial Instruments (Outside MiCA)

Tokens that confer rights equivalent to shares, bonds, or other financial instruments fall outside MiCA entirely and are regulated under MiFID II (Directive 2014/65/EU). This classification carries the heaviest compliance burden and is a critical boundary to respect in token design.

Token Classification Analysis

Florin (Capital Contribution)

Rationale: Florin provides access to the network's capital services, including liquidity provisioning, investment club participation, and value transfer between members. It functions as a utility token granting access to specific services supplied by the network.

Critical design constraint: Florin must not reference external asset values or stabilize its value against fiat currencies, commodities, or other digital assets. If Florin were designed to maintain a stable value by referencing external assets, it would be reclassified as an asset-referenced token under Title III, triggering dramatically higher capital requirements (EUR 350,000 minimum), mandatory NCA authorization, reserve asset custody obligations, and redemption rights for holders.

White paper: Required under Title II. Currently in drafting.

Joule (Work Contribution)

Rationale: Joule provides access to the network's work and task services. Members earn Joule by performing development, review, documentation, support, and other operational contributions. The token grants access to services that are already operational on the network.

Potential exemption: If the services accessible through Joule are fully operational at the time of any public offering, the Article 4(3)(c) exemption from Title II white paper requirements may apply. This exemption is being evaluated with legal counsel, but a white paper is being prepared regardless as a matter of best practice and transparency.

White paper: Required under Title II unless Article 4(3)(c) exemption applies. Currently in drafting.

House of Wisdom (Knowledge Contribution)

Rationale: House of Wisdom provides access to the network's knowledge services, including knowledge graph curation, research contribution, and educational content creation. Like Joule, it grants access to services supplied by the network.

Potential exemption: The same Article 4(3)(c) analysis applies as for Joule. If knowledge services are operational at the time of offering, the exemption may apply. A white paper is being prepared in either case.

White paper: Required under Title II unless Article 4(3)(c) exemption applies. Currently in drafting.

fXYZ (Governance Score)

Rationale: fXYZ is synthesized from Florin, Joule, and House of Wisdom according to the formula:

fXYZ = (f x 1.0) + (J_effective x 1.5) + (H_effective x 1.5)

fXYZ grants governance rights over protocol and technical matters only. This is the critical classification boundary.

Governance scope (permitted): Fee parameters, feature toggles, protocol upgrades, technical configuration, infrastructure decisions. These are protocol-level governance rights that keep fXYZ within the "other crypto-asset" classification under Title II.

Governance scope (excluded): Board elections, mergers and acquisitions, profit allocation, dividend decisions, corporate strategy. Granting rights over corporate governance decisions of this nature would classify fXYZ as a financial instrument under MiFID II (Directive 2014/65/EU), moving it entirely outside MiCA and into a regime with substantially higher requirements including investment firm authorization, prospectus obligations, and ongoing MiFID II conduct rules.

White paper: Required under Title II. Currently in drafting.

White Paper Requirements

MiCA Title II requires that issuers of crypto-assets (other than ARTs and EMTs) publish a white paper meeting the requirements of Article 6 and following the structure set out in Annex I.

Format and Structure

• Annex I structure: The white paper must follow the prescribed format covering all mandatory sections
• iXBRL tagging: Since December 2025, all MiCA white papers must be tagged in inline eXtensible Business Reporting Language (iXBRL) format to enable machine-readable processing by NCAs and ESMA
• Language: Must be available in an official language of each member state where the digital asset is offered, or in a language customary in the sphere of international finance

Content Requirements

Each white paper must include the following disclosures:

1. Issuer information - Legal name, registered office, LEI, directors, and any persons with qualifying holdings
2. Project description - Detailed explanation of the project, its objectives, and the role of the digital asset within it
3. Rights and obligations - All rights, obligations, and conditions attached to the digital asset
4. Underlying technology - Description of the distributed ledger, consensus mechanism, and relevant technical protocols
5. Risk factors - Comprehensive disclosure of risks to holders, including technology risks, market risks, and regulatory risks
6. Governance framework - Decision-making procedures, voting mechanisms, and governance structures
7. Use of proceeds - How funds raised through the offering will be used
8. Environmental and sustainability disclosures - Information on the environmental impact of the consensus mechanism and related processes

Notification Process

• White papers are submitted to the home NCA at least 20 working days before the intended publication date
• The NCA does not formally approve Title II white papers (this is a notification regime, not an authorization regime)
• However, the NCA retains the power to suspend or prohibit an offering if the white paper is incomplete, unclear, or misleading
• Once the notification period has elapsed without objection, the white paper must be published on the issuer's website and remain available for as long as the digital asset is held by the public

Compliance Status

References

• Regulation (EU) 2023/1114 — MiCA Full Text (EUR-Lex) — Token classification framework (Articles 3-6, Titles II-IV), white paper requirements (Article 6, Annex I)
• MiCA Summary — EUR-Lex — Accessible overview of MiCA categories
• MiFID II — Directive 2014/65/EU (EUR-Lex) — Financial instruments regulation (boundary for fXYZ governance token design)
• EMD2 — Directive 2009/110/EC (EUR-Lex) — Electronic money institution requirements for e-money tokens
• ESMA CASP Authorisation Supervisory Briefing (Jan 2025) — Guidance on CASP authorization process
• ElGamal, T. "A Public Key Cryptosystem and a Signature Scheme Based on Discrete Logarithms." IEEE Trans. IT 31(4), 1985 — Encryption scheme used for Florin confidential transfers