4.5 Recovery options

Issuers should lay down in their recovery plan a range of recovery options that are tailored on the issuer’s business model and the nature of the asset -referenced or e-money token issued.

As regards the recovery options laid down in Article 46 of the Regulation (EU) 2023/1114, issuers should apply the following:

• a) the recovery plan should set a maximum amount for liquidity fees to be imposed on redemptions and lay down how the duration of the measure will be communicated to the public;
• b) in setting the maximum amount of liquidity fees to be imposed on redemptions, issuers should ensure that this recovery option is not applied as a means to increase the issuer’s liquidity resources at the expenses of token holders. Issuers should ensure that this recovery option is applied only temporarily during the distress phase with the sole purpose to reduce redemption requests while stabilising the value of the token;
• c) the recovery plan should set out different quantitative levels of limits on the number or amount of tokens that can be redeemed on any working day. These levels should be determined based on the severity of the breach(es) of recovery plan indicator threshold(s) and should be set both at aggregate level (e.g. as a percentage of the entire amount of tokens issued) and at wallet level;
• d) the recovery plan should explain what other remedial actions the issuer will take once it has suspended redemptions. Issuers should include in their recovery plan that they will consider that suspending redemptions could negatively impact their reputation and the confidence of token holders and result in higher volumes of redemption requests once the suspension is lifted. Issuers should include in their recovery plan that they will especially consider whether the lift of the suspension should be accompanied by other measures, including but not limited to liquidity fees or limits to the amount of tokens that can be redeemed on a daily basis;
• e) issuers should include in the recovery plan how they plan to restore compliance with the regulatory requirements and clearly communicate to the market the next steps.

In addition to the recovery options listed in Article 46 of the Regulation (EU) 2023/1114, issuers should include at least one recovery option that would strengthen the capital position and one recovery option aimed at improving the liquidity position of the issuer. A non-exhaustive list of possible recovery options is provided in Annex III.

The recovery plan should also include details of any preparatory measure that the issuer should take to facilitate the implementation of the recovery plan or to improve its effectiveness together with a timeline for implementing those measures, as well as a description of any measures necessary to overcome impediments to the effective implementation of recovery options which have been identified in the recovery plan.

For every recovery option, issuers should include in the recovery plan a feasibility assessment, which covers at least:

• a) the assessment of the risks associated with the recovery option, whenever possible drawing on any experience of executing the recovery option or an equivalent measure; and
• b) an analysis and description of any material impediment to the effective and timely execution of the recovery option and a description of whether and how such impediments could be overcome.

In addition, issuers should outline for every recovery option how the continuity of operations will be ensured when implementing that option. This should include an analysis of internal operations (e.g. information technology systems, suppliers and human resources operations) and of the access of the issuer to key services from third parties which are essential for the regular conduct of its operations.

To prove the credibility of recovery options, issuers should provide quantitative and qualitative evidence to support the expected benefits of each option. In any case, the recovery plan should detail at least the items listed in Annex II.

Issuers also operating businesses other than the issuance of asset-referenced tokens and/or e-money tokens should assess the implications for their overall recovery capacity arising from those other businesses and should include in the recovery plan that they will adopt the most appropriate measures to ensure compliance with Articles 46 and 55 of Regulation (EU) 2023/1114.

Issuers should include in their recovery plan how they plan to monitor the implementation of the recovery options to ensure that the execution of the recovery plan is likely to restore compliance with the regulatory requirements applicable to the reserve of assets.

Issuers should include in the recovery plan the process envisaged for the implementation phase, always including an open and active dialogue with the competent authority to ensure a smooth transition towards the implementation of the issuer’s orderly redem ption plan pursuant to Articles 47 and 55 of Regulation (EU) 2023/1114 should it become clear that compliance with regulatory requirements applicable to the reserve of assets cannot be restored.

Recovery scenarios

Issuers should ensure to lay down in their recovery plans an adequate number of scenarios whose nature is sufficiently varied to cope with a wide range of shocks.

When developing their recovery plans, issuers should use financial system-wide distress scenarios and/or idiosyncratic financial distress scenarios and/or non-financial distress (including services distress) scenarios to test their recovery planning capabilities. Scenarios used for recovery planning should be designed in a way that would threaten the issuer’s compliance with requirements applicable to the reserve of assets if the issuer did not implement recovery measures in a timely manner. The number and complexity of scenarios should be determined by each issuer taking into account the principle of proportionality in line with Section 4.1.

Preservation of services

Issuers should lay down in the recovery plan how they intend to recover operations in a timely manner and fulfil their obligations in case of events that pose a significant risk of disrupting operations. Issuers should also list in the recovery plan the services they intend to preserve based on their business model and detail how they will ensure the preservation of the services related to asset-referenced and e-money tokens. The list of services to be preserved should at least include services related to the issuance and the redemption of tokens. Where the implementation of the recovery options has the potential to negatively impact the issuer’s provision of any of the services identified, the description of the recovery options should outline how the issuer plans to ensure the continuity of said services when implementing the recovery plan.

Issuers that operate payment arrangements in euro – as defined by the Eurosystem oversight framework for electronic payment instruments, schemes and arrangements (PISA framework)

• – should ensure that recovery actions foreseen in the recovery plan are consistent with the objective to maintain adherence to the principles outlined in the PISA framework.

In addition, issuers should ensure that actions foreseen in their recovery plan do not unduly affect the ability of any Crypto Asset Service Providers they deal with⁶ to comply with Regulation (EU) 2022/2554.

⁶ Reference is made to Crypto Asset Service Providers (CASP) providing custodial services, offering exchange services for conversion of ART to fiat and vice-versa. The recovery actions undertaken by the issuer should not conflict with the ability of the CASPs to maintain compliance with DORA Regulation.