White Paper: Monerium EURe

Last modified: September 10th, 2024

Table of contents

Disclaimer

This crypto-asset white paper complies with Title IV of Regulation (EU) 2023/1114, on markets in crypto-assets (“MiCAR“), and to the best of the knowledge of the management body, the information presented in this white paper is complete, fair, clear and not misleading and this white paper makes no omission likely to affect its import.

The e-money tokens (“EURe“) issued by Monerium EMI ehf. (“Monerium“) are not covered by the investor compensation schemes under Directive 97/9/EC or by the deposit guarantee schemes under Directive 2014/49/EU.

This crypto-asset white paper (“white paper“) has not been approved by any competent authority in any Member State of the European Union or the European Economic Area. The issuer of the crypto-asset is solely responsible for the content of this crypto-asset white paper.

Summary

This summary shall be read as an introduction to this whitepaper and any prospective holder should base any decision to purchase the e-money token on the content of the white paper as a whole and not on this summary alone.

The offer to the public of the e-money token does not constitute an offer or solicitation to purchase financial instruments and any such offer or solicitation can be made only by means of a prospectus or other offer documents pursuant to the applicable national law.

This white paper does not constitute a prospectus as referred to in Regulation (EU) 2017/1129 or any other offer document pursuant to Union or national Law.

Monerium is an authorised electronic money institution in accordance with Directive 2009/110/EC and is supervised by the Financial Supervisory Authority of the Central Bank of Iceland. Monerium issues on-chain fiat, including EURe, GBPe and USDe which are available on public blockchains, including Ethereum, Gnosis, and Polygon. Monerium on-chain fiat qualifies as e-money tokens (“EMT“) as it purports to maintain a stable value by referencing the value of one official currency, according to Art. 3(1) point (7) of MiCAR.

Each e-money token is issued at par value upon receipt of funds. The e-money token is backed 1:1 by the equivalent amount denominated in the same currency, either as a deposit in segregated accounts with credit institutions or invested in qualifying high-quality liquid assets with minimal market risk, credit risk, duration risk, and concentration risk.

Holders of the e-money tokens issued by Monerium have a right of redemption at any time and at par value. Redemptions are conditioned on the holder establishing a customer relationship with Monerium. Funds received in exchange for euro e-money tokens are transferred via the Single Euro Payment Area (“SEPA“) payment system and denominated in euros. Further information on our redemption process is available in Section 4 of our Terms of Service.

A customer relationship must be established to be eligible for receiving e-money tokens issued directly by Monerium. E-money tokens are issued at par value upon receipt of funds. Further information on establishing a customer relationship can be found in Section 2 of our Terms of Service.

Information about Monerium EMI ehf.

Name: Monerium EMI ehf. (“Monerium“)
Legal form: Private limited liability company (“ehf“)
Registered address and head office: Bjargargötu 1, 102 Reykjavík, Iceland
Date of registration: 26.10.2010
Registration number: 571110-0240
LEI: 2549006MBFC6YP688E22
Contact information: hello@monerium.com We aim to respond to your inquiry within 5 business days.
Parent company: Monerium ehf. Registration number: 550512-1060
Management body: Gísli Kristjánsson, CEO, Bjargargötu 1, 102 Reykjavík; Árni Guðjónsson, CRO, Bjargargötu 1, 102 Reykjavík; Hjörtur Hjartarson, COO, Bjargargötu 1, 102 Reykjavík; Jón Gunnar Ólafsson, MLRO, Bjargargötu 1, 102 Reykjavík;
Business activity: 64.99 - Other financial service activities, except insurance and pension funding
Parent Company Business activity: 62.01 - Computer programming activities 70.22 - Business and other management consultancy activities
Potential conflicts of interest: No potential conflicts of interest have been identified in relation to the e-money services provided by Monerium as Monerium is prohibited from granting e-money token holders interests and providing any investment services.
Issuance of other crypto-assets: Monerium issues e-money tokens denominated in other currencies such as USDe and GBPe within the EEA.
Other crypto related activities: Monerium does not engage in other crypto related activities. Monerium intends to provide its customers with foreign exchange (“FX“) services allowing customers to exchange Monerium e-money tokens denominated in different fiat currencies.
Connection with entities running the DLT used: Monerium issues e-money tokens on Ethereum, Polygon, and Gnosis Chain. The Company intends to add more blockchains and will make. appropriate amendments to this White paper in due course. Monerium has no connections with the entity, persons or the foundation which is associated with Ethereum or Polygon. Monerium has close connections with persons associated with Gnosis.
Financial conditions: Monerium is a startup company and relies on funding. Monerium business model is to collect interest from safeguarded funds, FX and API access fees.
Autorisation: The Financial Supervisory Authority of the Central Bank of Iceland granted Monerium authorization as an electronic money institution in accordance with Act. No. 17/2013, which implements Directive 2009/110/EC, from June 14, 2019.

E-money token information

Each Monerium e-money token represents the value of one official currency. Each issued token is backed by the same fiat currency equivalent amount 1:1. The funds Monerium receives in exchange for e-money tokens, are safeguarded in segregated accounts for and on behalf of the e-money token holder, separated from Monerium’s own funds. Safeguarded funds are kept as deposits in segregated accounts with banks or as high quality liquid assets (“HQLA“) denominated in the same fiat currency as the relevant e-money token under Art. 54 point (b) of MiCAR.

Monerium e-money tokens are live on Ethereum, Gnosis, and Polygon. Each token supports functions compliant with the ERC20 and ERC2612 token standards, further outlined here.

Currency Abbreviation Blockchain DTI
EUR EURe Ethereum X9J9K872S
EUR EURe Polygon RQWW6J6K0
EUR EURe Gnosis JXG6Q514K

Monerium conducted the design and development of EURe in-house. Ackee Blockchain a.s. audited the smart contracts and contract design that underpin EURe. The audits are accessible here.

Further information, including smart contract addresses, and design, can be found here.

Information about the offer to the public of EURe and its admission to trading

This white paper concerns Monerium’s offer of EURe to the public. Eligible persons are able to become customers and receive and redeem EURe directly from Monerium.

Currently EURe has not been admitted to trading on a third-party crypto-asset service provider platform. EURe may be available to trading on other platforms in the future, with or without the prior approval or request of Monerium. This white paper will be updated accordingly when EURe is made available to trading on other platforms.

As EURe is an e-money token there is no cap on the total number of units that can be offered. The total outstanding supply of EURe can be monitored in real time here.

The offer to the public of EURe is governed by the laws of Iceland and any dispute with the offer to the public of EURe shall be brought exclusively in the district court of Reykjavík, Iceland.

Information on the rights and obligations attached to EURe

Rights and obligations of EURe holders

Each EURe represents a claim on the underlying funds Monerium receives in exchange for EURe and safeguards. Holders are entitled to request redemption of their EURe at any time and at par value.

In order to enjoy redemption rights a holder must become a Monerium customer which is conditioned upon accepting our Terms of Service and successfully completing our customer due diligence (“CDD“) process.

A redemption request can be made by customers by submitting redemption order via our customer interface. Applicable information must accompany the redemption request including the name of the beneficiary and account number. The customer confirms the transaction by signing a message sent to the linked blockchain address with his/her private key. Subsequently, the same amount of EURe is burnt from the holder’s address, and funds (EUR) sent via SEPA to the identified beneficiary. As Monerium is required to comply with KYC/AML and sanction rules, in some cases, redemption requests may be halted and subjected to further checks or declined. Such cases can arise where Monerium deems that the holder has violated requirements laid down in our Terms of Services or suspicion of money laundering, terrorist financing, or sanction violation arises.

According to Art. 50 of MiCAR Monerium is prohibited from granting holders of EURe interest or any other benefit related to the length of time a holder of an EURe holds it. Therefore holders of EURe have no claim nor are entitled to any interests or other returns earned on the funds Monerium safeguards.

In case of Monerium insolvency EURe holder enjoy a special priority statutory claim according to the Icelandic Bankruptcy Act No. 21/1991, which states that “assets and interest in the possession of the bankruptcy estate shall be delivered to a third party if the third party proves his/her entitlement.“ Thus the funds received in exchange for EURe shall be paid from the asset pool in priority to all other creditors.

Blockchain transactions are generally irreversible. When EURe is transferred to a third-party address, which is not under the holder’s control, the holder automatically transfers and assigns the right to redeem e-money in exchange for funds to that third party. That third party’s right to redeem e-money received from the holder is contingent on Monerium accepting such a person as a customer. Blockchain transactions are entered into on the holder’s sole responsibility; therefore, losses due to fraudulent or accidental transactions can not be recoverable.

Monerium may be obligated to freeze EURe that is sent or received to/from blacklisted addresses. In such cases, a holder forfeits any rights associated with EURe, including the ability to redeem EURe.

Conditions for modification of rights and obligations

Rights and obligations associated with EURe are governed by applicable regulations, including but not limited to MiCAR and our Terms of Service.

Monerium reserves the right to amend our Terms of Service that are not in our customers’ favor by providing customers with at least two (2) weeks’ notice. Monerium will provide such notice to customers on our websites via email or other electronic means. Such amendments will become effective on the date specified in the notice unless the customer notifies us otherwise prior to the date specified in the notice. If a customer does not accept our revised terms, the customer has the right, at his/her sole discretion, without any liability, to terminate our Terms of Service forthwith.

As stipulated in Art. 51(12) of MiCAR, a new version of this white paper shall be drawn up, notified to competent authorities, and published on the Monerium website if any significant new factor, material mistake, or material inaccuracy capable of affecting the assessment of EURe is identified.

Insolvency

According to the Icelandic Bankruptcy Act No. 21/1991, EURe holders enjoy the highest priority claim against the bankruptcy estate in proportion to their ownership. In the event of Monerium insolvency, or if a financial claim is made against Monerium, no creditor or claimant should be able to claim funds held in our safeguarded accounts. This is because no other person or institution may have any rights or interest over the funds held in Monerium safeguarded accounts, such as a lien.

Recovery plan

In accordance with Art. 55 of MiCAR, Monerium will notify the Central Bank of Iceland of our recovery plan within six months of the date of the offer of EURe to the public.

According to Art. 55 of MiCAR, which refers to Title III, Chapter 6, Monerium must draw up and maintain a recovery plan that provides measures to be taken by Monerium to restore compliance with the requirements applicable to the reserve of assets in cases where Monerium fails to comply with those requirements.

In cases where events pose a significant risk of disrupting Monerium operations, the recovery plan may be implemented, which might impose certain restrictions on holders’ rights, such as the following:

1) liquidity fees on redemptions; 2) limits on the amount of EURe that can be redeemed on any working day; 3) suspension of redemptions.

Monerium will duly inform customers of any restrictions imposed upon implementing the recovery plan.

Redemption plan

In accordance with Art. 55 of MiCAR, Monerium will notify the Central Bank of Iceland of our redemption plan within six months of the date of the offer of EURe to the public.

This operational plan is intended to support the orderly redemption of EURe and ensure the equitable treatment of all EURe holders. The Central Bank of Iceland activates the redemption plan in cases where it is deemed that Monerium is unable or likely to be unable to fulfill its obligations, including insolvency, resolution, or withdrawal of Monerium electronic money institution authorization.

The redemption plan shall demonstrate Monerium’s ability to redeem all outstanding EURe issued without causing undue economic harm to its holders or to the stability of the markets of the reserve assets.

Activating the redemption plan may temporarily or permanently suspend the EURe holder’s right of redemption to ensure fair and equitable treatment of all holders.

An information notice about activating the redemption plan and its process will be published on the Monerium website and social media channels. The redemption plan will provide further information regarding claim submission, timelines, redemption process, and claim filing criteria.

Redemption requests filed under the redemption plan are conditioned upon the holder’s successful customer due diligence process, further explained in the Monerium Redemption Policy.

Complaint submission

Monerium has established a Complaint Policy which dictates how complaints are handled.

All complaints must be objectively based and submitted in writing to complaint@monerium.com. According to Monerium, a complaint must be objectively based to be considered.

Monerium will ensure that complaints receive swift, effective, and fair handling. Upon receiving a complaint, Monerium will acknowledge its reception and provide information regarding the complaint handling. Response to a complaint shall be provided within four weeks. If it’s impossible to respond within that time frame, the complainant shall be informed of the delay, its reasons, and when he/she can anticipate a response.

Customers can submit an appeal and seek a ruling with the Complaints Committee on Transactions with Financial Firms, according to Art. 42 of Act No. 17/2013, on the issuance and handling of electronic money.

The Complaint Committee is located at Guðrúnartún 1, 105 Reykjavik, with the email address fjarmal@nefndir.is and can be reached via the phone number +354 578-6500. Further information can be found on the Complaint Committee website nefndir.is.

It shall be stressed that Committee rulings do not prevent subsequent case handling by a court of law.

Protection scheme

No governmental or official protection or compensation scheme applies to EURe holders. EURe is fully backed 1:1 in EURO-denominated assets such as deposits or high-quality liquid assets safeguarded with regulated financial institutions on behalf of and for the benefit of EURe holders. Customer funds are segregated from Monerium’s own funds.

Governing law and forum

The laws of Iceland shall govern the use of EURe, and any claim or dispute arising thereof shall be subject to the exclusive jurisdiction of the District Court of Reykjavík.

Information on the underlying technology

Distributed ledgers, protocols, and technical standards used

Monerium issues EURe on public, decentralized blockchain networks. A blockchain is a type of distributed ledger technology that records transactions with an immutable cryptographic signature called a hash. Simply put, a blockchain is a database that stores and records transactions that is updated and shared across many computer networks. Public blockchains allow anyone to add data. Decentralization refers to the notion that a blockchain is not controlled or operated by any particular entity. A blockchain network exists whenever connected computers run software following the blockchain protocol and add blocks to the blockchain. These computers are referred to as nodes, and anyone can run them.

It is important to note that Monerium does not control or have any other privileged rights over the blockchain networks EURe is issued on. Thus, when an EURe holder transfers EURe to another blockchain address, such an act is conducted without Monerium’s involvement and responsibility. As mentioned above, Monerium does not control the supported blockchain networks.

In order to transfer EURe from one address to another, the transaction intent must be conducted in line with the requirements of the blockchain protocol in question and the technical standards underpinning the token. In most cases, transactions are subject to fees for which the holder is responsible. Fees are often payable in the native cryptocurrency of the blockchain network. For example, ether is the native cryptocurrency of Ethereum, and transaction fees on Ethereum are paid in ether.

Monerium issues EURe on three blockchains: Ethereum, Gnosis chain, and Polygon (PoS) (“Supported Blockchains“). Additional blockchains are likely to be added in the future. A list of supported blockchains will subsequently be updated on the Monerium website.

In certain circumstances, Monerium may be forced to temporarily or permanently suspend all activities related to EURe on a Supported Blockchain. Suspension may be required when technical vulnerabilities are identified, the Supported Blockchain is subject to a fork, or in other scenarios where security issues are identified. Any downtime is likely to occur immediately upon a fork of any EURe Supported Blockchains, limiting Monerium’s ability to warn EURe holders of such events. During such downtime, holders’ capabilities to conduct transfers of EURe may be severely limited.

Where a suspension becomes permanent, holders will be offered to migrate EURe to another Supported Blockchain or redeem. Monerium reserves the right to determine the date and time of the state of holdings of the suspended blockchain.

Monerium reserves the right to migrate and/or issue EURe to another blockchain network or protocol. In the event of a migration to another blockchain network or protocol, holders may be required to take reasonable actions to effectuate the migration to another blockchain or protocol. Holders that fail to effectuate such migrations and do not request redemption of their outstanding EURe before the effective date of such migration may not be able to receive the same level of services as described in our Terms of Service. Monerium will not be responsible or liable for any damages, losses, costs, penalties, or expenses of whatsoever nature, whether or not reasonably foreseeable by us and/or the holder, which may be suffered, sustained, or incurred, arising out of or in connection with the holder failure to effectuate such migration of EURe to another blockchain or protocol identified by Monerium.

Currently, EURe is only issued on blockchains that operate via proof of stake consensus protocols and are compatible with the Ethereum-Virtual-Machine (“EVM“). The EURe token follows the ERC-20 fungible token standard with additional functionality, such as a blacklist validator. The tokens are also compatible with the ERC-2612 standard, which supports “Permit“ functionality, allowing gasless token approvals through off-chain signatures and ERC-677 transfer and call standards.

Monerium can upgrade the business logic to fix bugs or add functionality while providing a fixed blockchain address and permanent token bookkeeping access.

Further deployments on non-EVM blockchains will be subject to an assessment of each blockchain’s existing token standards. Required updates to this white paper will be made when non-EVM-based blockchains are supported.

Technical requirements to gain control over EURe

A purchaser of EURe from Monerium must become a customer by submitting the required documentation in the customer due diligence process.

A purchaser must bring his/her blockchain wallet address and link it to the Monerium interface. The purchaser will be asked to sign a message with his/her private key to verify that the purchaser owns and controls the blockchain address in question.

Once the customer’s due diligence has been completed, a purchaser will receive an IBAN (International Bank Account Number) associated with the purchaser’s blockchain address. To receive EURe, the customer must receive a euro payment via SEPA to the IBAN Monerium provided to the purchaser. Once Monerium has received the order via SEPA, the equivalent amount of euros will be minted as EURe tokens to the purchaser’s blockchain wallet address.

Therefore, to execute an EURe blockchain transaction, purchasers must have the technical capabilities to operate their own blockchain wallets and hold the relevant native crypto-asset to pay blockchain transaction fees.

As EURe is issued on public blockchain networks, access to EURe can be achieved through various decentralized finance applications (“DeFi“). Purchasers should be aware that a direct customer relationship is required to redeem EURe directly through Monerium, and EURe acquired via De-Fi may become subject to further scrutiny and, in some cases, denial of service where we suspect fraudulent activity.

Consensus mechanism

EURe is currently only issued on blockchain networks that utilize the Proof of Stake (“PoS“) consensus mechanism. In a PoS consensus mechanism, validators lock up predefined amounts of the native crypto asset as their stake in exchange for a chance to validate new transactions and earn a reward. If a validator validates a bad block of transactions or his node goes offline, he can become subject to slashing, resulting in a portion or complete loss of the stake.

PoS allows networks to operate with substantially lower resource consumption than the Proof of Work consensus mechanism as it does not require validators to spend electricity on duplicate efforts, i.e., solving the same mathematical problem.

Incentive mechanisms to secure transactions and any fee applicable

Monerium, as the issuer, does not operate an incentive mechanism to secure transactions.

All fees incurred by transferring EURe on-chain are solely borne by the holder of the EURe initiating the transfer. Monerium is not responsible for paying on-chain transaction fees on behalf of EURe holders.

Audits

Monerium smart contracts are developed according to industry standards and audited by industry-leading security audit firms such as Ackee and Halborn.

Issues identified during the audits are reviewed, assessed, and remediated in proportion to the severity of the issue identified before a smart contract is updated or deployed in the Monerium production environment.

In line with our transparency policy all audits are published and made publicly available here.

As an authorised electronic money institution, our systems, processes and procedures are subject to periodic audits performed by KPMG. The findings of the audit reports are shared with our supervisory authority.

Information on risks

Risks associated with the issuer (Monerium)

Monerium, as the issuer of EURe, is exposed to several risks that can affect the stability, usage and reliability of EURe. Identified risks include, but are not limited to, insolvency risk, regulatory risk, operational risk, third party risk, compliance risk, technological risks, market risks, and environmental, social and governance (“ESG“) risks.

Insolvency risks: The risk of Monerium going bankrupt can severely impact the price stability of EURe and the capability of holders to redeem EURe at par value. Insolvency risk can also impact Monerium’s ability to perform redemptions upon request. - Mitigation: Monerium has appointed auditors who audit our financial statements for semiannual reporting to our supervisory authority as required of authorized Electronic Money Institutions.

Regulatory risks: Monerium services are conditional on complying with regulatory requirements, including maintaining a license or other governmental authorizations in the jurisdictions in which Monerium operates. Circumstances may change when more stringent requirements are imposed on companies such as Monerium. Such constraints may limit our ability to provide our services as is. Monerium may also lose its license or be subject to further restrictions in circumstances where Monerium fails to meet regulatory requirements. In any such circumstances, Monerium’s ability to provide EURe holders with the same level of services may be limited. - Mitigation: Monerium’s risk policy states that the company will obey the spirit and the letter of the laws and regulations that apply to the Company. Audits are carried out annually to ensure Monerium regulatory compliance.

Operational risks: Operational risk can stem from the inadequate implementation, execution, or overall functioning of our internal systems, processes, or procedures. Failure to manage operational risks can lead to service delays or more severe deficiencies that can materially affect EURe issuance and redemption processes. - Mitigation: Internal audits are performed annually to maintain sound operational standards.

Third-party risks: Monerium relies on multiple third parties to provide the services. A third party’s failure in service delivery may lead to unexpected outcomes, such as delays in performing issuing and redemption functions. - Mitigation: Monerium has established an outsourcing framework based on EBA guidelines to ensure that third parties carrying out functions on behalf of Monerium are fit for purpose.

Compliance risks: Failure to comply with all applicable legal requirements governing Monerium operations can lead to legal penalties and reputation loss. Customers may temporarily or permanently lose access to issuing and redemption functions in cases where suspicion of money laundering, terrorist financing, sanction evasion, or other illegitimate activities arises. - Mitigation: Monerium has established a robust compliance program with external and internal requirements that are audited annually.

Technological risks: Monerium IT infrastructure is subject to vulnerabilities and cyber threats. Failure or a security breach to Monerium’s IT infrastructure can lead to potential financial losses, personal data leaks or breaches, operational disruptions, and damage to Monerium’s reputation. - Mitigation: Monerium IT development follows robust risk management processes and information security management processes, which specify the requirements for establishing, implementing, maintaining, and continually improving information security management systems within the context of Monerium. Risk assessments are carried out at least yearly and follow the failure mode, effects, and criticality analysis (“FMECA“) method and as low as reasonably practicable (“ALARP“) principles.

Market risks: Funds that Monerium safeguards on behalf of EURe holders can decrease in value and/or become illiquid due to market forces. In such scenarios, Monerium may be unable to execute redemption requests within expected execution times as stated in Monerium’s Terms of Service. - Mitigation: Monerium has established an Investment Policy to define investment policies and procedures for safeguarding customer funds. The policy establishes investment guidelines and limits towards credit, market, currency, liquidity, and operational risks.

Environmental, Social, and Governance risks: With increased focus on ESG factors, business’s potential negative impact on the environment and societies must be assessed and controlled. ESG risks may prevent Monerium from issuing EURe on certain blockchain networks that utilize Proof of Work consensus mechanism due to the alleged excessive energy consumption. - Mitigation: Monerium strives to implement sustainable business practices with the aim of minimizing its carbon footprint.

Risks associated with EURe

EURe is associated with the following risk factors.

Technical risks: {#technical-risks} Due to the technical nature of blockchain networks, EURe is subject to various technical risks, including third-party platforms, transaction irreversibility, and private key management. Materialized technical risks can lead to the irreversible loss of EURe. See more on technical risks and how they are managed in the chapter Risk associated with the technology used below.

Price stability risks: {#price-stability-risks} As EURe may be acquired on secondary markets, its market value might not be stable compared to EUR. - Mitigation: Monerium enables direct customer relationships with EURe holders, allowing them to redeem EURe at par.

Safeguarding risks: {#safeguarding-risks} Mismanagement of the funds Monerium receives in exchange for EURe or where our banking partners become insolvent can lead to circumstances where the safeguarded assets decrease in value, subsequently becoming lower than the outstanding issued EURe. This risk could affect Monerium’s ability to redeem EURe at par and promptly. - Mitigation: Monerium has established a reconciliation policy that demands the conduction of reconciliation between the total value of issued EURe, orders, and safeguarded funds to be carried out at least daily. Monerium strives to establish safeguarding relationships with multiple and trusted financial institutions.

Liquidity risks: {#liquidity-risks} Market conditions may be such that the financial instruments Monerium invests the safeguarded assets in can become illiquid, thus deterring Monerium’s ability to perform redemption upon request. This risk can materialize during market stress, bank insolvencies, or during Monerium financial difficulties. - Mitigation: Monerium has established an Investment Policy to define investment policies and procedures for safeguarding customer funds. The policy establishes investment guidelines and limits towards credit, market, currency, liquidity, and operational risks.

Market risks: {#market-risks} Changes in the interest rate environment can affect the value of the financial instruments Monerium invests the safeguarded assets. Under such circumstances, Monerium may be unable to redeem EURe at par value. - Mitigation: Monerium has established an Investment Policy to define investment policies and procedures for safeguarding customer funds. The policy establishes investment guidelines and limits regarding credit, market, currency, liquidity, and operational risks.

Fraud risks: {#fraud-risks} Risk of EURe holder loss resulting from fraud, scam, or other malicious actions. Fraud can include phishing attacks, identity theft, and general scams. - Mitigation: In certain circumstances, Monerium can assist customers in recovering EURe associated with their address in cases where access to private keys has been lost.

Taxation risks: {#taxation-risks} Due to the novelty of blockchain technology, EURe’s tax treatment may differ between jurisdictions. Holders should also note that because MiCA defines EURe, it may qualify as a crypto-asset and electronic money. Thus, the tax treatment of EURe may vary among EEA member states. EURe holders are solely responsible for reporting and paying all if any, taxes associated with their EURe usage. - Mitigation: Monerium supports its customers by offering an account statement feature, which can help with tax filings.

Regulatory risks: {#regulatory-risks} Changes in legislation or enforcement actions carried out against Monerium can affect the legality and price stability of EURe. - Mitigation: Monerium’s risk policy states that the company will obey the spirit and the letter of the laws and regulations that apply to it. Audits are carried out annually to ensure Monerium regulatory compliance.

Risks associated with the technology used

As Monerium utilizes open, permissionless blockchain networks, EURe holders can be exposed to unique technological risks.

Blockchain risks: Blockchain networks can become subject to technical vulnerabilities, including attacks that can lead to network disruption, such as transaction downtime, which would prevent EURe holders from executing transactions during such disruptions. Other risks derived from the use of blockchain technology are identified below:

Smart contract risks: Smart contracts deployed by Monerium that govern the mint, burn, and transaction functions of EURe can be exposed to technical vulnerabilities that hackers can exploit leading to losses for EURe holders. - Mitigation: Monerium ensures that smart contracts are developed in accordance with industry standards to secure a safe and secure development of our product. Thus, Monerium ensures that relations are established with industry-leading security audit firms such as Ackee and Halborn.

Transaction risks: Blockchain transactions are generally irreversible. Therefore, losses due to fraudulent or accidental transactions may not be recoverable. - Mitigation: Functions are introduced to our smart contract framework, preventing holders from sending EURe to known black holes.

Private key management risks: Holders control their EURe holdings with their private keys. Mismanagement of private keys can thus lead to irrecoverable EURe loss. - Mitigation: An asset recovery process is available for customers who have linked a compromised address to Monerium services.

Interoperability risks: The open-source nature of blockchain networks allows for the ability to easily communicate, exchange data, and build on features and use cases created by others. This is generally referred to as interoperability. Consequently, EURe holders can use EURe within other blockchain products such as wallets, DeFi protocols, or decentralized applications (Dapps). Using third-party applications exposes EURe holders to technical risks associated with such products. Due to the permissionless nature of blockchain networks, Monerium cannot dictate who builds on top of EURe or allows EURe to be used within its products. - Mitigation: Monerium strives to maintain a close and honest relationship with our community and users. When Monerium becomes aware of frauds or exploits that utilize EURe, holders will be notified via our communication channels.

Infrastructure risks: Monerium relies on third-party service providers who provide infrastructure services such as access and connection to blockchain networks. Failure in the services provided can lead to delays in EURe operations and the execution of blockchain transactions. - Mitigation: Utilize best-in-class service providers.

Blockchain operational risks: Blockchain networks rely on consensus mechanisms to execute transactions. These mechanisms depend on the active participation of miners or validators. Plunges in validators’ activity or failures can compromise the capabilities of the network of processing and validating transactions. - Mitigation: Conducting deployment analysis of the blockchain networks Monerium intends to support to ensure the chain has a healthy incentive mechanism and validator community. Monerium has identified measures that can prevent irrecoverable loss for EURe holders in circumstances where a supported blockchain becomes inactive or unavailable.

Forking risks: Due to the technical nature of blockchains, a scenario may occur where the chain splits into two competing paths, i.e., a fork. Thus a duplicate version is created of the chain that, from that point in time, diverges. In such cases, EURe holders may hold EURe tokens on both chains, but holders should note that Monerium EURe liabilities won’t double. Forks may result in downtime where EURe holder capabilities of performing EURe functions can be limited. - Mitigation: Monerium reserves the right to determine which chain it will rely on going forward. Further disclaimers are provided for in our terms of service.

Unidentified risks: Due to blockchain technology’s novelty and immaturity, some risks associated with it can be unknown and untested. Thus, other risks that have not been identified above may emerge and affect EURe holders’ ability to perform certain functions. Mitigation: Monerium has established robust and reiterative risk management practices.

Technological risks: Monerium IT infrastructure is subject to vulnerabilities and cyber threats. Failure or a security breach to Monerium’s IT infrastructure can lead to potential financial losses, personal data leaks or breaches, operational disruptions, and damage to Monerium’s reputation. - Mitigation: Monerium IT development follows robust risk management processes and information security management processes, which specify the requirements for establishing, implementing, maintaining, and continually improving information security management systems within the context of Monerium. Risk assessments are carried out yearly and follow the failure mode, effects, and criticality analysis (FMECA) method and as low as reasonably practicable (ALARP) principles.

According to Art. 51(15) of MiCAR, ESMA is responsible for drafting regulatory technical standards on the content, methodologies, and presentation of the information pertaining to the sustainability indicators in relation to adverse impacts on the climate and other environmental related adverse impacts. At the time of publication of this white paper, the regulatory technical standards have not yet been approved. Therefore, the applicable information can’t be provided at this point. This section will be updated in line with the technical standards’ requirements once approved.

As Monerium has only deployed EURe on blockchain networks that operate via a proof of stake consensus mechanism, energy consumption is considered to be minimal compared to blockchains that rely on proof of work.

Providing accurate details for energy consumption is a complicated task. According to information provided by the Cambridge Bitcoin Electricity Consumption Index (“CBECI“)1, the annualized electric consumption for maintaining the Ethereum network is 5.71 GWh.2 According to a study carried out by the Crypto Carbon Ratings Institute (“CCRI“) Ethereum network’s annual electricity consumption is estimated to be 2.6 GWh, which corresponds to yearly carbon emission of 870 tonnes of CO2e.3

On the other hand, Gnosis Chain, the most used blockchain of EURe holders, has the goal of offsetting ten times the organizational and network emissions.4

  1. CBECI is an ongoing project created and maintained by the Cambridge Digital Asset Programme Team at the Cambridge Centre fro Alternative Finance, an independent research institute based at University of Cambridge. See: https://ccaf.io/cbnsi/ethereum ↩

  2. Accessed on 04.09.2024 ↩

  3. See: https://ethereum.org/en/energy-consumption/ ↩

  4. See: https://offsetra.com/profile/gnosischain ↩

© 2023, MONERIUM.

Monerium EMI ehf. is a company registered in Iceland (No. 571110-0240). Monerium EMI ehf. is authorised by the Financial Supervisory Authority of the Central Bank of Iceland under the Act No. 17/2013 on issuance and handling of electronic money.