Classifying Decentralised Assets Under MiCA: Inside the LST Taxonomy Initiative
Last week, Juan Ignacio Ibañez, General Secretary of the MiCA Crypto Alliance, presented our latest research on the classification of decentralised assets, with a particular focus on liquid staking tokens and wrapped tokens.
At first glance, another crypto taxonomy may sound unnecessary. But this initiative responds to a concrete regulatory problem that market participants, exchanges, and regulators are facing today.
The Core Issue: Regulation Was Not Designed for These Assets
Certain crypto-assets were simply not contemplated when existing regulatory frameworks were drafted.
Liquid staking tokens, wrapped tokens, and other yield-bearing assets without a centralised issuer do not fit neatly into traditional legal categories. They generate yield, may rely on algorithmic minting mechanisms, and often lack a clearly identifiable issuing entity.
This creates classification uncertainty both in the European Union and in the United States. In the EU context, the question is particularly acute because MiCA does not operate in isolation.
Crypto-assets may fall under:
- MiCA, which distinguishes between e-money tokens (EMTs), asset-referenced tokens (ARTs), and other crypto-assets (OTHR);
- MiFID II, governing financial instruments; or
- The Alternative Investment Fund Managers Directive (AIFMD).
This creates both a classification problem and a policy question. If staking assets were required to obtain licences to operate under financial instrument or investment fund frameworks, the impact on parts of the DeFi ecosystem in Europe could be significant.
Industry Called for Academic Classification
During a DARTE Roundtable in October 2025, several exchanges explicitly called for academic research to classify decentralised assets. The objective was to produce academic research examining the characteristics of decentralised assets that could be submitted to ESMA through its Q&A mechanism.
Many taxonomies already exist in the literature, but few incorporate legal variables in a systematic way.
Our initiative builds on prior academic research and translates it into a framework designed for regulatory relevance and industry use.
A Multi-Dimensional, Orthogonal Framework
A key feature of the taxonomy presented by Juan is that it is not hierarchical.
It does not force assets into a simple decision tree with a single dominant feature. Instead, it evaluates assets across multiple independent, or orthogonal, dimensions. An asset’s characteristics in one dimension do not determine its characteristics in another.
These dimensions include:
- Technical standards and token function;
- Mechanism design, including minting structure and control;
- Yield source and distribution model;
- Redemption structure and legal claims;
- A structured assessment of decentralisation.
This approach reflects the structural complexity of decentralised assets. Tokens that appear similar may differ significantly in minting authority, yield mechanics, redemption structures, and governance.
Although the research was motivated by classification challenges surrounding liquid staking tokens and wrapped tokens, the taxonomy itself applies to crypto-assets more broadly.
The Minimum Decentralisation Test
Central to the presentation was the Minimum Decentralisation Test.
Drawing on academic literature, the research evaluates multiple indicators of centralisation and unilateral control. The objective is to assess decentralisation using measurable indicators rather than assumptions about how a project describes itself.
This matters because many crypto-assets resemble traditional financial instruments in economic terms. A liquid staking token may mirror certain characteristics of a derivative. A wrapped token may resemble a depositary receipt. A centralised lock-and-mint structure may resemble debt.
However, resemblance does not determine legal classification. As Juan noted, the existence of a TradFi analogue does not necessarily mean that an asset falls into that regulatory category.
In the research, decentralisation is analysed as one of the factors that may influence how such assets are assessed under existing regulatory frameworks.
From Theory to Operational Tool
The framework is not purely conceptual.
The research has been operationalised in code through a crypto-asset data structure that encodes key attributes. The research team instantiated and classified the top 100 crypto-assets by market capitalisation, drawing on sources such as white papers, terms, and project documentation.
Decision trees and multi-dimensional charts illustrate how assets distribute across structural and functional dimensions. The objective is to develop a tool capable of supporting the classification of thousands of tokens, while recognising that detailed case-by-case analysis remains necessary.
Next Steps and Industry Collaboration
The initiative is developing through several stages:
- Working paper: A working paper outlining the taxonomy has already been released.
- Legal review: A complementary legal report is currently under review by academic specialists.
- Industry working group: The project has established a working group bringing together exchanges, banks active in the European crypto market, and universities to review the research and provide feedback.
As Juan explained, the objective is to build consensus around the framework and refine it through collaboration between researchers and industry participants.
The working paper will continue to evolve as feedback from academics and market participants is incorporated. The aim is to develop a structured framework that can support clearer assessment of decentralised assets under existing regulatory frameworks.
