Applicability of MiFID II to Exotic Vaults

MiFID II governs financial instruments and related services, including trading platforms, custody, and investment advice. Its application depends on whether the tokens issued by Exotic Vaults or traded on its platform qualify as financial instruments, such as transferable securities or derivatives.

Vault Tokens, representing fractional ownership of pooled RWAs, are not inherently financial instruments in a way that aligns with the definition of transferable securities under MiFID II, as they represent the direct ownership and control of actual physical assets. Similarly, the $XVAULT token cannot meet the definition of a transferable security under MiFID II as it does not issue profit or accrue value. However, any future governance proposals for $XVAULT tokens to share trading fees or other financial benefits would risk their classification as financial instruments. Such a classification would impose strict compliance requirements, including suitability assessments, investor protections, and pre- and post-trade transparency.