Stablecoin issuer / redeemer in Iceland

Electronic Money Tokens (EMTs):

Defined as a crypto-asset that purports to maintain a stable value by referencing the value of one single official currency (e.g., a EUR-backed stablecoin).

These are considered a specific type of "electronic money" under MiCA and are regulated similarly to traditional e-money.

Issuers must ensure that the reserve assets are fully backed, always at a 1:1 ratio, by the fiat currency they reference.

The reserve assets must be held in credit institutions and be segregated from the issuer's own assets.

They must be highly liquid, low-risk assets denominated in the referenced currency.

Issuers of EMTs must be authorized either as a credit institution (bank) or as an electronic money institution (EMI) under Directive 2009/110/EC (and thus under Act No. 87/2011 in Iceland) AND receive specific authorization under MiCA from the FSA.

EMIs issuing EMTs are subject to stricter prudential and governance requirements under MiCA than standard EMIs.

Issuers of ARTs must be authorized by the competent authority (the FSA in Iceland) under MiCA.

This authorization process includes rigorous requirements regarding governance arrangements, capital requirements (minimum capital of €350,000 or 0.2% of the average amount of ARTs in circulation, whichever is higher), operational resilience, recovery and resolution plans, and robust internal controls.

Credit institutions are exempt from requiring a separate ART authorization if they meet specific MiCA requirements.

Holders of EMTs have a right to redeem their tokens at par (1:1) at any time, against the single fiat currency referenced, directly from the issuer.

The issuer must process these redemptions promptly.

Holders of ARTs have a right to redeem their tokens directly from the issuer.

The reserve assets must be held in credit institutions and be segregated from the issuer's own assets.

A significant portion of the reserve (at least 30%) must be deposited in segregated accounts with credit institutions.

Specific investment policies for reserve assets are mandated to ensure minimal market risk.

Most, however, existed in a regulatory grey area without specific rules.

Regulator: The primary financial regulator is now the Seðlabanki Íslands (Central Bank of Iceland), which absorbed the functions of the former Financial Supervisory Authority (Fjármálaeftirlitið, FME) in January 2020. It is responsible for supervising financial undertakings, including those dealing with virtual assets, primarily from an AML/CFT perspective.

VASP Registration: Any entity providing services related to virtual assets, including the safekeeping and/or administration of virtual assets on behalf of customers (i.e., custody), is required to register as a Virtual Asset Service Provider (VASP) with the Central Bank of Iceland. This is not a "license" in the traditional sense of financial services but rather an AML/CFT registration that imposes significant obligations.

The registration is mandated by the Act on measures to combat money laundering and terrorist financing No. 140/2018, which transposes EU AML Directives (AMLD5, soon AMLD6) into Icelandic law.

MiCA Authorization: Under MiCA, "custody and administration of crypto-assets on behalf of clients" is explicitly defined as a crypto-asset service (Article 3, point 16). Providers of this service will be required to obtain authorization from their competent national authority (in Iceland, likely the Central Bank of Iceland) to operate as a Crypto-Asset Service Provider (CASP) (Article 59).

This authorization is a full financial services license, distinct from the current AML registration.

Prudential Safeguards: MiCA (Article 66, point 10 and Article 67, point 7) requires CASPs to have robust prudential safeguards. These safeguards can take the form of:

Own funds (capital requirements).

An insurance policy.