Executive Summary
This memorandum analyses the regulatory characterisation of the two crypto‑assets contemplated by the YieldGuard protocol in light of Regulation (EU) 2023/1114 on Markets in Crypto‑Assets ("MiCAR"), which entered into force for stablecoins on 30 June 2024 and for all other provisions on 30 December 2024.
- **yTBill** – the ERC‑4626 receipt token redeemable for a pool of tokenised U.S. Treasury Bills – **qualifies as an *asset‑referenced crypto‑asset*** ("ART") because its value is derived from multiple underlying assets (wrapped T‑bill tokens) rather than being pegged to a single official currency. It does **not** meet the definition of an *e‑money token* ("EMT").
- **YIELD** – a prospective governance and fee‑sharing token – **qualifies as "another crypto‑asset"** under Title II MiCAR.
- The RAIF structure remains outside retail scope; therefore the marketing prohibition to retail investors in Article 42 MiCAR does not bite.
- Issuance of yTBill to professional investors via an EU fund vehicle can rely on the **limited‑distribution exemption** in Article 15 (2) MiCAR if yearly issuance remains < 150 m EUR.
- YIELD issuance must be preceded by a **MiCAR white paper** filed with the CSSF and published on the website, but no prior regulatory approval is necessary.
The note sets out the applicable obligations, transitional timelines, and a compliance roadmap.
1. Regulatory Background
Regulation (EU) 2023/1114 on Markets in Crypto‑Assets (MiCAR) establishes a harmonised EU regime for:
- **Title III** – asset‑referenced tokens (ART);
- **Title IV** – e‑money tokens (EMT);
- **Title II** – other crypto‑assets and initial offerings; and
- **Title V** – crypto‑asset service providers (CASP).
The stablecoin titles (III & IV) have applied since 30 June 2024. The remaining provisions, including CASP licensing, apply since 30 December 2024. Transitional grandfathering under Article 149(8) ends on 30 June 2026.
2. YieldGuard Product Overview
YieldGuard operates an on‑chain aggregator vault that converts permissioned USDC deposits into the most competitive tokenised U.S. Treasury Bill wrappers ("TBILL", "wSTBT", etc.) and returns an ERC‑4626 vault receipt token named **yTBill**.
The protocol is deployed on Arbitrum, controlled by a 3‑of‑5 Safe multisig, and wrapped in a Luxembourg RAIF SCSp with FundRock as external AIFM.
A secondary governance token **YIELD** is envisaged post‑Series A; it would allow stakers to vote on fee levels and earn up to 50 % of protocol revenues.
3. Token Classification Analysis
3.1 yTBill Token
| Criterion | Test | Assessment |
|---|---|---|
Reference to underlying assets? | ART requires that the value be based on "another asset or basket of assets" (Art. 3(1)(7)). | yTBill derives value from wrapped T‑bill tokens representing U.S. Treasuries. ✔ |
Peg to official currency? | EMT requires peg to a single fiat (Art. 3(1)(6)). | Not pegged to USD 1:1; NAV fluctuates with T‑bill price & yield. ✖ |
Redemption right? | ART issuer must offer redemption at market value (Art. 31). | yTBill redeemable for pro‑rata NAV of wrappers. ✔ |
Significance thresholds? | Significant ART if > 1 bn EUR in issuance (Art. 43). | Launch TVL cap 25 m USD; sub‑threshold. ✔ |
Conclusion: yTBill is an asset‑referenced crypto‑asset under Art. 3(1)(7) MiCAR.
3.2 YIELD Governance Token
YIELD confers governance rights and fee share but is **not backed by any asset or currency**. It therefore falls under Title II as "another crypto‑asset". No EMT/ART obligations apply.
4. Issuer & CASP Obligations
4.1 yTBill Issuance Obligations (ART, non‑significant)
| Obligation | Article | Applicability | Compliance Plan |
|---|---|---|---|
| White paper with CSSF notification | 17 & 18 | ✔ | Draft legal white paper by Q4 2025; file via FundRock. |
| Legal entity in EU | 27(1) | ✔ | RAIF SCSp incorporated in Luxembourg. |
| Own funds ≥ 350 k EUR or 2 % of reserve | 30 | ✔ | RAIF capital call prior to mainnet. |
| Reserve & custody | 33 & 34 | ✔ | 100 % reserve in tokenised T‑bills; legal title held by Standard Chartered Depositary. |
| Monthly reporting to CSSF | 36 | ✔ | Automate NAV feed via ISO 20022. |
**Limited Distribution Exemption:** Art. 15(2) exempts ART from white‑paper and marketing rules if (i) offered solely to qualified investors and (ii) outstanding amount < 150 m EUR over 12 months. YieldGuard’s KYC gate to professional investors and 25 m USD launch cap satisfy these conditions, but the exemption is **optional**; a compliant white paper is recommended for future retail expansion.
4.2 YIELD Token Obligations (Other Crypto‑Asset)
| Obligation | Article | Applicability | Compliance Plan |
|---|---|---|---|
| Crypto‑asset white paper & CSSF filing | 5 & 6 | ✔ | Draft before token generation event (TGE) in 2026. |
| Advertising standards | 7 | ✔ | Legal review of all marketing. |
| Inside information disclosure | 92 | ✔ | Establish disclosure committee; publish via blog & RSS. |
4.3 Crypto‑Asset Service Provider (CASP) Licence
YieldGuard itself does **not** custody client private keys; deposits and withdrawals are executed by users interacting with the smart contract. However, the RAIF **offers** and **sells** yTBill, triggering the "execution of orders" and "placing of crypto‑assets" services under Art. 3(16).
*FundRock* plans to seek a CASP licence extension; until then, services are kept within the **reverse‑solicitation carve‑out** (professional investors introducing themselves) and distribution is limited to Luxembourg under the AIFMD passport.
5. Transitional & Grandfathering Periods
| Provision | End of transitional period | Relevance |
|---|---|---|
| ART obligations (Title III) | 30 June 2024 – already in force | Requires compliance at launch. |
| CASP licensing (Title V) | 30 December 2024 → 30 June 2026 grandfathering if already operating | YieldGuard may rely on grandfathering until 30 June 2026 provided it files intention with CSSF by 1 December 2025. |
| Other crypto‑asset white papers (Title II) | 30 December 2024 | YIELD TGE planned post‑deadline; full compliance necessary. |
6. Compliance Roadmap
| Quarter | Milestone |
|---|---|
Q3 2025 | Draft yTBill ART white paper; legal sign‑off; CSSF pre‑notification. |
Q4 2025 | Finalise own‑funds capitalisation & reserve audit; mainnet launch under Article 15(2) exemption. |
Q1 2026 | Prepare CASP licence dossier jointly with FundRock; submit before 1 May 2026. |
Q2 2026 | Draft YIELD white paper; publish and file with CSSF 20 days before TGE. |
Q3 2026 | Implement periodic reporting template (Art. 36) in subgraph; first monthly submission. |
Q4 2026 | Review significance thresholds; update contingency plan if TVL > 1 bn EUR. |
7. Risks & Recommendations
- **Significant ART Re‑classification** – If yTBill circulation exceeds 1 bn EUR or average daily users > 2 m, heightened obligations under Art. 43–55 apply. *Mitigation:* protocol‑level TVL cap and quarterly monitoring.
- **Scope Creep into EMT** – Future addition of an on‑chain USD‑redeemability feature could turn yTBill into an EMT. *Mitigation:* maintain redemption in‐kind for NAV in wrappers only.
- **CASP Grandfathering** – Failure to secure licence by 30 June 2026 would force suspension of new deposits in the EEA. *Mitigation:* allocate internal budget and external counsel now.
8. Conclusion
Under the current design, **yTBill is an asset‑referenced crypto‑asset** and **YIELD is another crypto‑asset**. The RAIF structure and professional‑only distribution permit reliance on MiCAR exemptions, but YieldGuard should nonetheless prepare full white papers to future‑proof against scale and regulatory expectation.
Please let us know if the Board requires further analysis or an updated roadmap.
Prepared by:
Chris [redacted], CEO
Co‑founder 3, CFO & RAIF specialist
External Counsel (MiCAR Desk)