Virtual Assets as Underlying Instruments

Directive Virtual Assets as Underlying Instruments

I. GENERAL PROVISIONS

Art. 1 Purpose

This Directive specifies the technical, operational, and disclosure requirements for the use of virtual assets as underlying instruments.

Art. 2 Scope

This Directive is applicable to underlying virtual assets of Exchange Traded Products (ETPs), Exchange Traded Funds (ETFs), derivatives and Depository Shares admitted for trading on MERJ Exchange.

II. LISTING

Art. 3 Eligibility Criteria

1. Blockchain and Protocol

   1. Virtual assets must be based on an open-source software utilizing blockchain or distributed ledger technology (DLT).

   2. Transactions must adhere to a consensus protocol validated by network participants through a transparent, verifiable process.

   3. Issuance of additional units of the virtual asset must follow clearly defined rules and ensure equitable treatment of all participants.

2. Market and Liquidity Metrics At the time of applying for provisional admission or listing:

   1. The virtual asset must have a market capitalization of at least USD 100 million.

   2. The average daily trading volume must be at least USD 10 million over the preceding 30 calendar days.

   3. The virtual asset must have been actively traded for at least 180 calendar days prior to the application.

   4. Market data can reference reputable sources such as www.coinmarketcap.com, www.coingecko.com or www.cryptocompare.com

3. Public Pricing

   1. The virtual asset’s pricing must be determined through regular, transparent mechanisms and publicly available on platforms accessible via the internet.

   2. It must be tradable against a recognized fiat currency supported by MERJ (e.g., USD, EUR).

   3. Price feeds must be available via reputable financial information systems (e.g., MERJ, Bloomberg, Refinitiv, or other equivalent providers).

4. Trading Venue Requirements In addition to LR103 xii. a) at least one trading venue for the virtual asset must satisfy all the following:

   1. Licensed in a recognized jurisdiction;

   2. Offer trading against a recognized fiat currency;

   3. Ensure transparency by publishing real-time prices;

   4. Provide an API for pricing information and trading; and

   5. Maintain a functional, English-language website.

5. Eligible Projects and Use Cases

   1. Underlying virtual assets that support the economy of the blockchain on which it operates are permitted, particularly projects that:

      1. Provide blockchain infrastructure, such as layer-1 and layer-2 protocols, or interoperability solutions;

      2. Facilitate decentralized finance (DeFi) applications or other significant use cases that promote innovation and efficiency in the blockchain ecosystem.

   2. Projects associated with meme coins or tokens with no substantive utility, unsustainable tokenomics, or primarily speculative purposes are expressly excluded.

Art. 4 Pre-listing Assessment

Prior to submitting an application for the listing of securities with virtual assets as underlying instruments, the issuer must provide a detailed report to MERJ Exchange demonstrating compliance with the criteria outlined in Art. 2.

Art. 5 Listing Particulars Requirements

The Listing Particulars or equivalent information document must include:

1. A clear explanation of differences between virtual assets and traditional assets, highlighting risks such as lack of intrinsic value, unregulated trading venues, low liquidity, and volatility.

2. Specific risks associated with virtual asset securities, including risks of fraud, cyberattacks, and operational failures.

3. A reference on the potential for temporary trading suspensions due to suspected market manipulation, falsification of liquidity (e.g. wash trading) or criminal activities or other exceptional circumstances.

4. A reference to delisting if trading is suspended for more than three months.

Art. 6 Suspension of Trading and Delisting

1. MERJ Exchange reserves the right to temporarily suspend trading at its discretion or at the request of the issuer in exceptional circumstances, such as:

   1. Suspected price manipulation.

   2. Falsification of liquidity.

   3. Significant legal or regulatory actions against the project.

   4. Prolonged network outages or security breaches.

   5. Loss of market demand or liquidity.

2. If trading is suspended for three consecutive months, the securities concerned will be delisted unless the underlying issue is resolved.

3. MERJ Exchange assumes no liability for any losses resulting from trading suspensions or delistings under this Article.

Art. 7 Treatment of Forks

In the event of a fork affecting the underlying virtual asset during the life of a security:

1. The new virtual asset may be admitted for trading, provided it complies with the criteria in Art. 2, except for the trading history requirement.

2. Alternatively, the security may incorporate the new virtual asset as an additional underlying instrument, subject to the issuer’s discretion and disclosure obligations.

III. FINAL PROVISIONS

Art. 8 Entry into Force

This Directive comes into force on 1 March 2025.