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The European Union’s banking watchdog has called on stablecoin issuers to voluntarily comply with “guiding principles” in managing risks and protecting consumers ahead of mandatory rules set to take effect in a year’s time.
In April, the EU approved the Markets in Crypto Assets Regulation (MiCAR), the world’s first comprehensive set of rules for trading cryptoassets, including bitcoin and ether, as well as issuing stablecoins, which are cryptoassets backed by a currency or asset.
On Wednesday, the European Banking Authority (EBA) released its first set of measures for public consultation, aimed at further defining the requirements for issuing stablecoins under MiCAR. These measures are scheduled to be enforced from June 30, 2024, and include provisions such as a permanent right of redemption and rules for handling complaints.
Although the EBA expects a surge in stablecoin issuance in the coming months following the approval of the framework law, it urges firms to adhere to its guiding principles on good governance and risk management ahead of the mandatory rules.
The EBA stated, “The statement is intended to encourage timely preparatory actions to MiCAR application, with the objectives to reduce the risks of potentially disruptive and sharp business model adjustments at a later stage, to foster supervisory convergence, and to facilitate the protection of consumers.”
Additionally, the European Securities and Markets Authority (ESMA), another EU regulatory body, has proposed draft rules for crypto asset service providers (CASPs) involved in trading cryptocurrencies. These rules, currently open for public consultation, aim to authorize CASPs while ensuring the separation of customer cryptoassets and trading activities, avoiding the commingling of company and customer funds, and applying lessons from events such as the collapse of the US crypto exchange FTX.
The ESMA rules are set to be implemented in January 2025 and do not include a compensation scheme for customers who lose money invested in unbacked cryptoassets.
Furthermore, the EBA plans to issue a second set of draft rules in October, focusing on capital requirements for stablecoin issuers and outlining how firms should handle stablecoin redemptions in stressed markets.
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