EN | Stablecoin Payments in the EU Navigating the MiCA–PSD2 Interplay from Brazil | MERGE São Paulo

Uh our next session is a keynote. So it's my pleasure to introduce uh our next speaker who will uh talk about stable coins payments in IU. Uh navigating the Mica PSD PSD2 interplay from Brazil. Uh please welcome to the stage Barina Vilonga, partner at Asesi Abogados.

Good afternoon anyone. Uh I hope you hear me right. Okay. So I need the presentation. Ah here it is.

Perfect. Uh so I will try to explain to you in just 15 minutes what uh crypto asset service providers from Brazil or from Latin American countries need to know uh if they want to operate in and and render services in Europe. As as you may know the European regulations are not so easy and they are increasingly uh complicated. uh features. So um first of all just to to begin with uh as I said we are going to focus on some regulatory key points um and uh especially uh if if the service providers are trying to um render services related to stable coins uh as in Mika wording EMTs money tokens which basically are stable coins uh we will focus on the on the MEA regulations but as well on PSD2 which is the payment service uh uh directive uh in the European Union which overlaps at some points the the MA regulations.

So uh reverse solicitation as a start point if um if a user in based in the European Union solicits uh as its own initiative a service from a crypto asset service provider located uh outside the European Union. This third country CASP can render the service according to uh Mika 2 article 61 that allows the reverse solicitation exception. So this provider might not need a MA authorization to render that service. However, the uh the European authorizations has uh have interpreted this uh exception very narrowly. So it is extremely difficult for uh a crypto asset service provider to comply with the reverse solicitation exception because you cannot do any marketing retargeting.

you cannot change uh at the minimum the service you were supposed to render you were uh you were solicited. So it is not a a a very great um way for a Latin American company to plan the expansion to Europe based on reverse solicitation. um because it's so difficult you need to maintain uh two buckets with European clients and non-European clients. Uh you cannot engage with uh influencers in Europe. You cannot use any European languages.

Uh so it's it's very difficult and well this is this is what I have said uh just summarizing. Um so for Latin American firms reverse solicitation is not a viral growth strategy. What can we do? Um we need a MAC license. But if the crypto asset service provider is at the same time providing services regarding stable coins then we have the problem because we need another authorization an authorization under PSD2.

And that's the main headache. now in in Europe that we are under the double licensing requirements which complicate things uh a lot more for any company trying to render the service in Europe. These more or less are the the regulatory bodies we are focusing on. Mika, PSD2 and the IMON directives. Each of one are defining funds are defining payments and we can find in Mika for example many articles or recital directly referring to PSD2 or EMD um definitions.

Uh so what's the result once we have uh read these three um regulatory bodies um that we have um EMTs are e money tokens stable coins are defined as electronic money and at the same time electronic money are funds. So if we if we can define a transfer of e money tokens, we can say that a transfer of e money tokens equals a transfer of funds and equals a payment transaction or a payment service. And that's where the problem begins. We need a payment institution authorization in order to provide that service. So a ma license is not enough.

We need a PSD2 license. This is more or less what I have uh said. It's uh another way to say it but in case you have any doubts. Um so uh from March the 2nd uh just this month uh all CASPs trying to provide uh services with uh stable coins especially transfers or or administration they need this double uh licensing requirements implications for market entry the non-European firms must obtain both licenses or partner with another company that it is already a PSP that is a payment service provider. This is the main problem.

So we will focus on um this the we will um list the the the problems and then we will propose some solutions to these problems. Problem one the dual nature of uh the EMTs. As we have said, we have the crypto nature and then the payments nature. So we are under two regulatory bodies. Um the impact on Latin American firms is like uh they need two licenses to operate.

Um problem two, custodial wallet. We can um confirm that some custo wallets depending on how they are structured they uh are considered to be payment accounts. So uh it is not enough just not to try to transfer uh eoney tokens. We need to be sure that our wallet won't be a payment account and even firstparty transfers may be considered as uh ser as payment services. So we need to be careful and structure the product accordingly.

Problem three, uh the European banking authority uh puts a deadline 2nd March. We are uh overpassed. Uh and we have to find the solution for this. Uh the reverse solicitation is not viable as I said because we cannot um rely on the narrow exception. And uh problem five is that as a result of it we have a compliance duplication.

This is we need to look at MA requirements at PSD2 requirements and comply both. Of course, uh the the European authorizations are not being so tough, but for example, equity requirements have to be combined. Uh fraud requirements, security requirements, identification. Uh so this complicates things a lot and practical solutions. Um solution one, a pure mika business.

How can we do this? not operating with stable coins which is very limiting and uh avoid us operating uh normally. Um solution three uh two sorry a closed wallet architecture. We need as as I said, we need to focus on how we build our wallet in order not to be considered a payment account or partnership with a European payment service provider, which is nowadays the the best approach we are facing now in in in Europe. Given that we are in the process of drafting PSD3 and we hope this all this uh nightmare situation will be addressed there and finally just one uh license will be required but for now and for the next years we don't know um the part the partner option is the best option in order to avoid this um uh this magnificant structure you need to create uh in order to comply with both uh regulations.

And uh finally there's another solution which is create uh create a hybrid um structure. Um so you can create one entity within your group with the with the MA license then another one focusing on PSD2 and via introgroup agreements uh trying to um render both types of services. Um well here I have a a Brazilian uh and European regulatory comparison but I don't think I'm the uh right person to do it. Just uh um just a brief note to say that in Latin American you don't have this problem as far as I as far as I know uh because this this um these requirements are solved by either by one figure or the other but not with the overlap and the the the need to obtain two licenses at the same time. Uh so I think that uh in Europe we need to learn about this kind of mistakes and overlappingings and cross references and for now just for you to know if you are planning to go into the European market then take into account that we have this overlap and you may be needing some um different licenses PSD2 uh MA license or partner with some company that already holds one of them uh in order to be compliant.

Um so that's it. I I will escape I will skip this because um well you may know uh better than me and the conclusion as I said just think about the product beforehand think about what you what need to to to render think about the service the wallet and everything if you don't want to fall in the wrong um in the wrong regulation and that's it I'm Marina Vonga from Asencia Bogados and if you have any doubt once I have finished then uh you can approach we can we can talk because I have not now um given a deeper analysis because it's quite uh complicated uh so just welcome uh all questions welcome once I finish thank you very much for your attention