EU Takes Aim at Multi-Currency Stablecoin Regulation with EBA Draft

The European Union's pursuit of regulatory clarity in therealm of cryptocurrencies took another stride as the European Banking Authority(EBA) published its latest draft requirements for stablecoins, referencingmultiple currencies under the Markets in Crypto Assets (MiCA) regulation today(Wednesday).

EBA Sets Guidelines for Complaints on Asset ReferenceTokens

Collaborating with the EU's markets regulator, the EuropeanSecurities and Markets Authority, the EBA has been crafting rules under theMiCA framework. This latest publication marks the culmination of efforts, withmore batches expected to follow as part of the consultation process.

The draft Regulatory Technical Standards released by the EBAdelineate the stipulations, templates, and procedures for complaints receivedby issuers of what MiCA defines as asset reference tokens (ARTs). Unliketraditional stablecoins, which are typically pegged to a single currency, suchas the euro or US dollar, ARTs possess the flexibility to reference multiplecurrencies or other assets, including cryptocurrencies.

#EBA final draft Regulatory Technical Standards (RTS) under #MiCAR These set out the requirements, templates and procedures for handling complaints received by issuers of asset reference tokens (ARTs) https://t.co/yT3pSGSowh pic.twitter.com/DvycTm2MqI

Notably, the MiCA regulation places asignificant emphasis on establishing stringent requirements for stablecoinissuers. While the broader MiCA framework is slated to come into effect inDecember, the regulations specific to stablecoins are anticipated to beenforced as early as this summer. The regulatory landscape surroundingcryptocurrencies has been evolving rapidly as authorities seek to balanceinnovation with investor protection and financial stability.

Minimum Capital and Liquidity Requirements forStablecoins

Earlier, the EBAproposed regulations for cryptocurrency and stablecoin markets, as reportedby Finance Magnates. These rulesinclude minimum capital and liquidity requirements for stablecoin issuers toensure they have sufficient funds for investor redemptions. The regulations aimto establish a framework for the stablecoin industry and prevent potentialcrises.

Key elements include maintaining liquidity for assetreserves backing stablecoins and using only high-quality assets. The proposedregulations align with the Markets in Crypto-Assets Regulation tomonitor and mitigate risks from asset-referenced tokens and e-money tokens innon-EU currencies.

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EBA Calls for Early Adoption of Stablecoin ‘Guiding Principles’

The European Union's banking regulator urged stablecoin issuers to adopt the Markets in Crypto Assets Regulations (MiCAR) guidelines, which the EU adopted in April. Specifically, the regulator has cited the provisions related to the permanent right of redemption of assets by the users and the rules for guiding complaints in the MiCAR requirements.

The European Banking Authority (EBA) released a report today (Wednesday) for public consultation that provides more information about the requirements provided by the MiCAR for stablecoin issuers. The requirements will reportedly be implemented on June 30, 2024.

EBA Eyes Stablecoins

"The statement is intended to encourage timely preparatory actions to the MiCAR application, with the objective of reducing the risks of potentially disruptive adjustments of business models at a later stage. It aims to promote supervisory convergence and to facilitate the protection of consumers," the EBA said in a statement.

Ahead of the implementation of the MiCAR next year, the EBA is expecting an increase in the issuance of stablecoins following the approval of the regulations. In light of that, the regulator urged the stablecoin issuers to apply its good governance and risk management policies.

The EBA is expected to issue subsequent draft rules, which include the guidelines for companies to redeem their stablecoins when the markets are volatile, in October. The rules will also address capital requirements for stablecoins issuers, the EBA said.

The MiCAR is considered one of the most comprehensive cryptocurrency laws in the EU. Adopted by the Council of the EU in May, the regulation aims to protect consumers dealing with digital assets, promote environmental sustainability, and prevent money laundering in the digital asset space.

EU Regulates Cryptocurrencies

In a separate report, the EU's European Securities and Markets Authority (ESMA) similarly provided guidelines for Crypto Asset Service Providers (CASPs) who trade cryptocurrencies. In the guidelines, the ESMA stated that the CASPs should ensure that they separate customer assets from their own. The ESMA's guidelines will reportedly be implemented in January 2025.

In a report published today (Wednesday) by Finance Magnates, Verena Ross, Chair of the ESMA, said: "This first consultation package is an important milestone for ESMA in the implementation of the MiCAR framework. It translates to our ambition to set high regulatory standards in the EU for the trading of cryptocurrencies.

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EU regulator sets restrictive measure guidelines for crypto providers

Crypto-asset service providers that carry out transfers must choose a screening system that allows them to comply with the EU's restrictive measures regimes.

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