National competent authorities power to increase the quantity of ARTs and EMTS issuers' own funds or reserve assets in relation to Article 45(4)

Does Article 45(4) of Regulation (EU) 2023/1114 (MiCA) confer on national competent authorities or the EBA the power to require an ART or EMT issuer to increase the  quantity of its own funds or reserve assets beyond the 1:1 backing established under Articles 36–38 of MiCA, or is the scope of Article 45(4) confined to requiring improvements to the  composition, maturity and liquidity profile of reserve assets? More broadly, are the reserve and capital requirements that may be imposed on ART and EMT issuers under MiCA Level 1 capped by the mechanisms expressly provided for therein — in particular the bounded own-funds add-on mechanism of Article 35(5) following stress tests — such that national competent authorities or the EBA do not have discretion under Article 45(4) to impose open-ended or permanent structural overcollateralization or additional capital requirements beyond what MiCA Level 1 has expressly foreseen?

MiCA establishes a structured and internally coherent prudential framework for asset-referenced tokens (ARTs) and, by virtue of Article 58 of MiCA, for certain e-money tokens (EMTs) issued by EU-authorised entities. The reserve framework applicable to these EMTs under Articles 36–38 of MiCA requires issuers to hold reserve assets equal in value to the tokens in circulation at all times — a full 1:1 backing model — in the form of highly liquid assets with minimal market and credit risk. This reserve parity architecture constitutes a foundational element of MiCA's prudential design. Article 35(5) of MiCA provides a specific and express mechanism for quantitative prudential reinforcement in response to stress test outcomes. It explicitly empowers competent authorities to require issuers to hold own funds of up to 20% or, in exceptional circumstances, up to 40% above the existing own funds requirements calculated under Article 35(1) to (4), where the results of stress tests so warrant. The deliberate inclusion of this targeted and bounded provision reflects a clear legislative choice: where the EU legislator intended to authorise stress-test-driven balance-sheet reinforcement through quantitative add-ons, it did so expressly, within a defined framework and subject to an explicit ceiling. This suggests that MiCA Level 1 operates as a capped and internally calibrated system of prudential requirements, rather than as an open-ended framework under which competent authorities may impose unlimited additional reserve or capital requirements following stress tests. Article 45 of MiCA governs liquidity risk management policies and procedures. Article 45(4) empowers competent authorities, where they identify deficiencies in an issuer's liquidity management arrangements following a stress test conducted pursuant to Article 45(7), to require the issuer to "strengthen the liquidity requirements." Article 45(7), first subparagraph, point (b) of MiCA specifies that the liquidity management policies and procedures referred to in Article 45 must address the  composition, maturity and liquidity profile of reserve assets. Read in context, the power under Article 45(4) to "strengthen liquidity requirements" appears directed at the qualitative dimensions of reserve management — requiring issuers to hold more liquid assets, shorten maturities, or improve diversification — rather than at expanding the  quantity of reserve assets beyond the 1:1 coverage mandated by Articles 36–38. A question of legal interpretation therefore arises as to whether Article 45(4) may be relied upon as a standalone and uncapped legal basis to impose permanent, quantified structural overcollateralization requirements. Such a requirement would not merely adjust the composition or liquidity profile of existing reserve assets but would instead alter the  quantity of reserves  and capital required — a dimension already addressed by MiCA through the express, bounded mechanism in Article 35(5) and the reserve parity framework in Articles 36–38. Interpreting Article 45(4) as authorising open-ended, permanent overcollateralization would effectively transform Article 45 into a parallel and unconstrained prudential capital buffer mechanism, rendering Article 35(5) partially redundant.