A leaked draft of the text, reviewed by CoinDesk, shows the rules could apply to fractionalized NFTs.

The European Union has finalized the full text of its landmark Markets in Crypto Assets legislation. Officially, the text is still open to comments, but sources briefed on the talks have told CoinDesk that it is, in practice, finalized.

A leaked draft of the bill dated Sept. 20 and verified by CoinDesk urges EU enforcers to take a “substance over form” approach to the law, meaning its provisions could even apply to some assets categorized as NFTs.

In principle, NFTs are excluded from the framework, which requires issuers of crypto assets to publish white papers containing technical roadmaps, for platforms to register with the authorities, and requires stablecoin issuers to hold capital and be prudently managed.

NFTs are typically designed to have a unique digital identifier that cannot be copied, interchanged or subdivided, but the rise of fractionalized assets – where a set of fungible tokens are issued to represent one NFT – have been drawing some attention from regulators as they could resemble traditional securities.

While the leaked draft – thrashed out in a series of technical meetings following a June 30 deal – shows MiCA doesn’t apply to NFTs that are genuinely unique and incapable of being traded with each other, “the issuance of crypto-assets as non-fungible tokens in a large series or collection should be considered as an indicator of their fungibility,” the [final] compromise text says in a Recital, even if the issuer gave it a unique identifier.

A Recital is a text which introduces an EU law and sets out its motivation. Though not – unlike the substantive articles of the regulation – legally binding, a recital can be used by supervisors and courts when interpreting the scope of the legislation.

The details of the provision have caused concern within the industry. The exact drafting used could determine whether in practice the regulation covers the bulk of the NFT market – such as similar, but distinct Bored Apes, implying issuers and trading platforms would be caught by its strictures.

When considering whether to regulate a particular asset, national and EU regulators “should adopt a substance over form approach under which the features of the asset in question should determine the qualification, not its designation by the users,” the text added.

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