European Union Stablecoin Issuers With Bank Assets in Reserve Will Get Extra Regulation, EBA Draft Says

The European Union (EU) agency is consulting on new MiCA rules that mean “significant” tokens are centrally supervised with additional capital requirements Under draft guidelines released Monday by the European Banking Authority, European stablecoin issuers would face additional rules if their reserves contain a high proportion of derivatives or covered bonds. Markets in Crypto Assets Regulation (MiCA) means that any stablecoins perceived to be too linked to the financial system would face additional capital requirements and centralized supervision by the European Union (EU).

CoinDesk obtained a document that stated that “financial distress at one ART [asset-referenced token] or EMT [e-money token] issuer can materially increase the likelihood of distress at other crypto-assets or financial institutions, given the network of contractual obligations that are in place.,” referring to the two types of stablecoins defined by MiCA, which are tied to fiat currency or assets in exchange. “Arts and EMTs that pose significant risks require issuers to meet additional obligations, and the EBA is partially or completely responsible for their supervision,” the draft, which the industry will review next week, reads.

The European Commission requested guidance from the bank agency in December on how to determine if a stablecoin is related to other sections of the financial world or is internationally significant, with a deadline of Sept. 30.

Along with already legislated metrics such as the number of users and market capitalization, the EBA has now established a range of preliminary indicators such as the share of assets held in reserve issued by other regulated financial institutions other than deposits and the market share of cross-border payments. Under MiCA, stablecoins deemed important will be supervised by the EBA rather than national authorities, must undergo additional stress tests, and must have 3% of their reserve reserves instead of the typical 2%.

In June 2024, MiCA will allow cryptocurrency wallet providers and exchanges to operate across the EU under one license, and its stablecoin requirements go into effect in June 2024. Rules designed to address the risks posed by large-scale projects such as the now-defunct Libra/Diem project include a contentious cap on the usage of digital payments that become so popular that they substitute the euro.

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