MiCAR Review Consultation and Conflict of Laws: To Infinity and Beyond

This post was written by Dr. Emeric Prévost, Research fellow at the University of Vienna (Austria) and currently visiting scholar at the University of Kyushu (Japan).

As it has been already reported on this blog (here and here), the European Commission (EC) is currently consulting the public by means of a general and targeted consultations (see here), open until the 30^th of September 2026, for the review of the Markets in Crypto-Assets Regulation (MiCAR). Interestingly, in its targeted consultation, the EC asks questions specifically about the private law (Targeted consultation, section 4.6) and conflict-of-laws (Targeted consultation, section 4.7) treatment of digital tokens. The questions asked raise several issues which may be of interest for the readers of this blog and which merit thus a few critical observations.

A Broad Scope

It should first and foremost be observed that the private (international) law questions asked extend beyond the crypto-assets that fall within the scope of MiCAR to include the case of financial instruments recorded on a distributed ledger (i.e., “DLT financial instruments”). For the targeted consultation, digital tokens thus refer to both crypto-assets under MICAR and DLT financial instruments. This is significant, and justified, to the extent that private law and conflict-of-laws rules do not intrinsically depend on regulatory categories and dichotomies such as MiCAR-regulated and MiCAR-not-regulated crypto-assets. At the same time, this highlights the need to avoid the undue multiplication of specialised private law regimes and conflict-of-laws rules that risk conflicting with each other; hence also the legitimacy to ask whether existing conflict-of-laws rules at the European Union (EU) law level are (in)sufficient to address the issues raised by digital tokens (Question 84.1). Answering such a question evidently calls for some nuance as it will depend on the specific point at stake, and whether the issue belongs to contractual, extracontractual, or in rem matters. I would thus like to make here only a few brief observations about some manifestly necessary conflict-of-laws adaptations and innovations.

Conflict-of-Laws Adaptation

As regards contractual or extracontractual issues in relation to the issuance and trading of digital tokens, existing conflict-of-laws rules set out in Rome I and Rome II Regulations may be general enough to appear prima facie sufficient. Some specific rules, however, may only apply partially. For instance, in the absence of any choice of law in contractual matters, the rule provided for in article 4(1)(h) Rome I Regulation which designates as applicable the law of a multilateral system in financial instruments will not apply to neither MiCAR-regulated crypto-assets (i.a., stablecoins), nor tokenised commercial bank deposits or tokenised units of central bank money. While the said provision may apply to DLT securities, it would thus not apply to other types of digital tokens that may nevertheless be used as settlement assets. Such a difference of treatment is hardly justifiable given that DLTs enable integrated trading and settlement systems where operations shall be subject to the same governing law irrespective of the nature of the assets. The conflict rule of article 4(1)(h) Rome I Regulation should therefore be broadened to include other types of assets as well as systems (or platforms) that are not limited to regulated markets and multilateral trading facilities.

Conflict-of-Laws Innovation       

Regarding proprietary aspects, there is today no general EU conflict-of-laws rule for the determination of rights in rem and there is a broad consensus that the lex rei sitae rule is inadequate in the context of digital tokens. Sectorial and specific rules such as those contained in the EU Financial Collateral Directive (FCD) and the Settlement Finality Directive (SFD) are thus insufficient and inadequate to the extent that they are limited to a specific type of digital token (i.e., financial instruments, recorded on a distributed ledger) and point to the location of “accounts”, thereby failing to encompass the variety of assets, wallets and systems for the holding, exchange and settlement of tokens. In proprietary matters, it appears therefore that sectorial adaptations or add-ons are likely to be insufficient to ensure a certain level of harmonisation and legal certainty across assets and systems. In other words, a self-standing regulation may well be justified (as argued notably by Cayetana Santaolalla Montoya in her blogpost), and even more so since a clear conflict-of-laws rule (or regime, more generally) is in any event necessary.

Conflict-of-Laws Necessity

The necessity of a conflict-of-laws rule with one or several multilateral connecting factors for rights in remissues derives from its crucial and overarching function of coordination and orientation of private law regimes in line with private parties’ expectations. Such key function is perhaps best understood by distinguishing three characteristics inherent to the nature of a multilateral conflict-of-laws rule, namely the fact that: (1) it is preliminary to any substantive private law question; (2) it is supplementary (not alternative) to substantive private law regimes; and (3) it is universal in scope. I shall briefly clarify each of those characteristics in the context of the current EC targeted consultation.

Preliminary nature   

The EC targeted consultation explicitly asks whether there is any legal uncertainty as to the private law treatment of issuance, holding and transfer of tokens under national law (Question 80). This question should, however, be coupled with the questions about the applicable law, since it is only if and where the law applicable to the issuance, holding and transfer of digital tokens can be determined with certainty that substantive conditions and limitations may be asserted. In other words, conflict-of-laws questions comes prior to and to a certain extent determine substantive outcomes.

Supplementary nature

Conflict-of-laws rules are not only preliminary, but also supplementary – and not alternative – to substantive private law regime. In passing, it should be noted that this entails, perhaps contrary to the canonical “neutrality” of the Savignian tradition but nevertheless in alignment with contemporary realities, that conflict-of-laws rules may contain material limitations, conditions and fixed policy objectives.

In its targeted consultation paper, the EC asks notably how legal certainty could be achieved in proprietary matters (specifically pointing at: ownership or entitlement, transfer and enforceability of rights recorded as tokens) and lists four non-limitative options (Question 81.2), namely: (1) the introduction of a 28^th regime (presumably optional); (2) the full harmonisation of EU member States’ private law for tokens; (3) the partial harmonisation of EU member States’ private law for tokens; and (4) the introduction of a specific EU conflict-of-laws regime for tokens. Such list calls for some critical observations since the introduction of a dedicated “conflict-of-laws regime” does not necessarily exclude the other listed options.

First, even if a 28^th regime is introduced, such regime may not be chosen or may simply not apply. What would happen then? Conflict-of-laws rules would in such cases remain fully relevant and necessary. Arguably, even the possibility to choose the said 28^th regime should be reflected at the conflict-of-laws level as it implies to allow some degree of party autonomy in matters of rights in rem.

Second, a dedicated “conflict-of-laws regime” would not even be an alternative to a partial harmonisation of EU member States’ private law for digital tokens, since conflict-of-laws rules would remain relevant for the issues which fall outside the scope of the harmonised provisions.

Third, an EU “conflict-of-laws regime” would not be an alternative to a full harmonisation of EU member States’ private law for digital tokens either, because interpretative issues warranting coordination even within the EU will remain, while coordination with non-EU legal systems should likewise not be ignored or overlooked.

Universal nature 

Any conflict-of-laws rule, either at the EU or domestic level, should not be limited to any specific geographical area; its vocation is to be universal in the designation of the applicable law. In this sense, only a “conflict-of-laws regime” is capable of ensuring an adequate coordination across legal systems.

It follows from the above that a multilateral conflict-of-laws regime that is universal in scope, as well as preliminary and supplementary to substantive private law regimes, is necessary in its function of coordination and orientation of legal systems, in congruence with private parties’ legitimate expectations. Within the EU, and for the purpose of guaranteeing a well-functioning single market, the appropriate level for such regime is undoubtedly the European one. How should, however, such conflict-of-laws rule or regime be designed?

Conflict-of-Laws Design  

The EC targeted consultation interestingly addresses the issue of the design of a potential conflict-of-laws rule for the “proprietary aspects of tokens” and clearly contemplates the possibility of a conflict rule structured as a waterfall, seeking feedback on a set of non-limitatively listed connecting factors. The EC manifestly draws inspiration from Principle 5 of the UNIDROIT Principles on Digital Assets and Private Law (here) and from the factors outlined by the Financial Markets Law Committee (FMLC) in its 2018 report on “Distributed Ledger Technology and Governing Law: Issues of Legal Uncertainty” (here).

The EC thus consults on the relative importance of a number of connecting factors, ranging from the law specified in the token itself to the law of the primary residence of the encryption private master keyholder (PREMA), including the following list of factors: the law specified in the system supporting the token; the law of the place of establishment of the operator of the DLT system; the law of establishment of the issuer (where there is one); the law of the issuer’s supervisory authority; the law of the supervisory authority of the technology service provider; the law of the supervisory authority of the register; and the law of the relevant operating authority/administrator (PROPA) of the system. The list is, however, open-ended and invites respondents to suggest other relevant connecting factors. A few observations should be made in this regard.

The notion of control

First, the EC seems to miss the opportunity to consult on the notion of control, even though it will undoubtedly constitute a key element of any private law and conflict-of-laws regime. A definition of the notion is notably suggested in Principle 6 of the UNIDROIT Principles on Digital Assets and Private Law. Whether such definition is adequate and the extent to which it can be implemented in EU law should nevertheless be thoroughly discussed. For the time being, though, it suffices to recall that the notion of control fundamentally aims to characterise in the digital context the “physical” link (corpus) (by opposition to the “mental state”, animus) of the regime of possession in private law. Whether and the conditions under which a title of ownership or other rights in rem may derive from the “control” of a digital token shall depend, however, on the applicable law. To determine such law, it should be noted that it may likewise be referred to the place of habitual residence of the person controlling the digital tokens at the material point in time. In short, the notion of control appears the be key for both substantive and conflict-of-laws regimes and should therefore be explicitly addressed.

Conflicts of systems

Second, the vocation of a multilateral conflict-of-laws regime is to be universal in scope and may thus lead to the designation of non-EU laws. Such third-country legal systems may, however, also provide for a specific conflict-of-laws regime, with potentially a different approach, or simply different connecting factors, or yet differently ordered connecting factors. For instance, in the United States (US) there is already a specific conflict-of-laws regime for Controllable Electronic Records (CERs) (i.e., crypto-assets, grosso modo), since section 12-107 (Governing Law) of Article 12 of the US Uniform Commercial Code (UCC), introduced following the 2022 amendments (here) – and currently (as of 29 September 2026) transposed in 37 US States’ legislations – provides for a waterfall of connecting factors which manifestly served as inspiration for Principle 5 of the UNIDROIT Principles on Digital Assets and Private Law. Should such US conflict-of-laws regime conflict with an EU regime, however, one will be faced with a conflict of systems. This does not mean that the EU should necessarily copy the US conflict-of-laws regime, but it requires instead to conceive ways to solve such possible conflicts. This could be achieved in various ways.

A common device would be to use the mechanism of renvoi. If, for instance, the relevant EU conflict-of-laws rule designates the law of an US State, while the relevant conflict rule of that US State refers back to EU law or the law of an EU member State, then a conflict of systems would be avoided if EU law were to accept such referral (renvoi) from the US conflict rule. The mechanism of renvoi should not lead, however, to unpredictable results for private parties, which explains that renvoi is generally not allowed where parties are free to choose the applicable law. Should a choice of law be exercised by the parties, even in proprietary matters, renvoishould then not be permitted.

Material restrictions

Third, it is important to underline that a choice of law, especially in proprietary matters, may be subject to some restrictive conditions. Limitations or restrictions may indeed be imposed because of public interest considerations given the highly regulated environment of digital tokens which responds to the investor, market, liquidity and monetary sovereignty risks associated with the issuance, holding and exchange of digital tokens. It may be for instance that the choice of a specific law is incompatible with the negotiable character of digital tokens – which an EU proprietary regime would certainly need to recognise –, or that such choice of law would undermine third parties’ rights or interests. To avoid and pre-empt such case scenarios, EU law may notably limit the array of laws that parties can choose from, e.g. by imposing to choose the law of an EU member State or a future possible 28^th regime. Overriding mandatory norms may here also enter the picture. Certainly, though, any restriction must be thoroughly considered and carefully crafted.

Recognition of third-country regimes

Fourth, any material restriction under EU law would be effective only in respect of a limited number of persons, such as issuers, platform managers, custodians or holders situated in the EU; third-country persons may indeed choose a non-EU law without being subject to EU law restrictions at all. Should then any effect of the choice of non-EU law by third-country persons be refused where, for instance, digital tokens holders who are habitually resident in the EU are affected? Surely the answer must be negative and calls for the EU legislator to provide for the conditions under which non-EU law, duly applicable pursuant to foreign conflict-of-laws rules, may produce effects within the EU. There would indeed be no legitimate reason to refuse to give effect to the proprietary regime of a foreign law if it does not contradict EU public policy and does not result from fraud. A genuine link with the country whose conflict-of-laws rules have been applied may additionally be required. Other conditions or methodological approaches may be further discussed and refined to ensure that an EU conflict-of-laws regime effectively and appropriately fulfils its role in coordinating and guiding legal systems in support of the cross-border development of the digital tokens economy. Arguably, this would require though another more detailed targeted consultation by the EC, focusing specifically on private law and conflict-of-laws issues.

Conclusion

The EC’s targeted consultation should be welcomed, as it touches upon issues of private law and conflict of laws and thereby acknowledges the need to address fragmentation and coordination among private-law regimes, including in relation to proprietary matters. On the other hand, the questions posed reveal certain preconceptions and suggest the need for further preliminary work with a view to a more precise and detailed consultation. It also appears that issues of private law and conflict of laws arise beyond the limited context of MiCAR-regulated crypto-assets and extend to digital tokens more generally, including DLT securities and other assets not regulated under MiCAR.

If a specific conflict-of-laws rule were to be introduced in MiCAR, close attention should then be paid to its coordination with other conflict-of-laws rules that may eventually be introduced in other instruments. Such an approach would inevitably give rise to complexity and fragmentation, with heightened risks of incoherence, to the extent that a standalone regulation establishing a conflict-of-laws regime for digital tokens might seem preferable. In any event, a conflict-of-laws regime based on multilateral connecting factors and universal in scope is necessary, in addition to any eventual harmonisation of EU Member States’ laws or the establishment of an EU private-law regime for digital tokens. Its specific design, however, requires further preliminary work, ideally also some degree of coordination with international fora such as the Hague Conference on Private International law (HCCH) where discussions on these issues are ongoing, and in any event a careful drafting of rules and definitions involving a mix of methodological approaches.