“The Concept of Financial Instruments: Drawing the Borderline between MiFID and MiCAR” by Matthias Lehmann (University of Vienna) and Fabian Schinerl(University of Vienna – Faculty of Law) was jointly published on 14 May 2024 in the  EBI Working Paper Series No. 171.

EU financial law has a problem with its most basic building-block, the concept of ‘financial instruments’. The importance of clearly defining this term has been compounded with the adoption of the Markets in Crypto-Assets Regulation (MiCAR), which specifically excludes certain financial instruments from its scope. By implication, there must be crypto-assets that qualify as financial instruments and are thus already regulated under existing financial law, such as MiFID. Yet it remains unclear how they can be distinguished from others that fall under MiCAR.

To solve this problem, we develop a new, conceptual approach for interpreting the term ‘financial instruments’, and in particular its backbone, the concept of ‘transferable securities’. Drawing on the economic foundations of financial law and comparisons with the US, we suggest understanding the concept not in the classic way of a definition with several criteria that must be cumulatively met. Instead, we propose a flexible definition, which emphasises certain key features of traditional securities and financial instruments, which do not necessarily need to be present simultaneously, but can be fulfilled to a varying degree, with more emphasis on one compensating for the lack of another. In this way, we strike a balance between formalism and materialism, with a view to meet the requirements of legal certainty and foreseeability on the one hand and of the openness or regulation to innovations in the marketplace on the other.

Read the entire paper here: https://ssrn.com/abstract=4827376 or http://dx.doi.org/10.2139/ssrn.4827376