In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment (for example, in the form of a cheque or electronic payment invoice) into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks.

In trading, clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction. It involves the management of post-trading, pre-settlement credit exposures to ensure that trades are settled in accordance with market rules, even if a buyer or seller should become insolvent prior to settlement. Processes included in clearing are reporting/monitoring, risk margining, netting of trades to single positions, tax handling, and failure handling.
Systemically important payment systems (SIPS) are payment systems which have the characteristic that a failure of these systems could potentially endanger the operation of the whole economy. In general, these are the major payment clearing or real-time gross settlement systems of individual countries, but in the case of Europe, there are certain pan-European payment systems. TARGET2 is a pan-European SIPS dealing with major inter-bank(exchange services) payments. STEP2, operated by the Euro Banking Association is a major pan-European clearing system for retail payments which has the potential to become a SIPS. In the United States, the Federal Reserve System is a SIPS.

On October 10, 2022, the European Parliament Committee on Economic and Monetary Affairs (ECON) endorsed the approved text for the Markets in Crypto-assets regulation (MiCA). While the bill’s main provisions were agreed upon in June, the approved text sets out a harmonized crypto regulatory framework that supports innovation and fair competition while ensuring market integrity and a high level of protection for retail holders.

While MiCA broadly applies to cryptoasset service providers (CASPs) providing crypto services to EU residents, some areas fall outside of MiCA’s scope. These include crypto-assets that:

• Are unique and not fungible with other crypto-assets, such as digital art and collectibles
• Qualify as financial instruments as defined under Directive 2014/65/EU, such as security tokens
• Represent services or physical assets that are unique and not fungible, including real estate or product guarantees
• Are offered for free, or are automatically created

Classification of crypto-assets
The MiCA bill introduces three sub-categories of crypto-assets based on whether an asset seeks to stabilize its value in relation to other assets. These include asset-reference tokens, e-money tokens, and other crypto-assets.

Asset-reference tokens are assets that maintain a stable value by referencing several currencies, one or several crypto-assets, one or more commodities, or a combination of such assets. Contrastingly, e-money tokens are assets that aim to stabilize their value by referencing only one official currency, such as stablecoins. All other crypto-assets that do not fall into either of the aforementioned groups make up MiCA’s third sub-category.

CASP requirements
Under MiCA, potential retail holders of crypto-assets must be informed about the characteristics, functions, and risks of the crypto-assets they intend to purchase.
Therefore, CASPs will be required to compile a whitepaper containing general information on the

• Issuer and offerer
• Rights and obligations attached to the crypto-assets
• Underlying technology used for such assets
• Related risks

Prior approval for marketing communications will also be required for asset-reference and e-money tokens. All advertising messages and marketing materials should be fair, clear, not misleading, and aligned with the information provided in the crypto-asset whitepaper.

Further requirements for asset-reference tokens and e-money tokens include regulatory approval before launching new services and vetting key management personnel. Regarding management, the bill notes that issuers of asset-referenced tokens should have robust governance arrangements, including a clear organizational structure and effective processes to identify, manage, monitor, and report the risks to which they are or might be exposed.