The European Banking Authority (EBA) has called for the voluntary adoption of stablecoin standards by issuers, ahead of expected regulations that will come into effect in a year. The EBA released its initial set of measures to clarify the requirements of the Markets in Crypto Assets Regulation (MiCAR) for stablecoin issuance, which is set to take effect on June 30, 2024.
As the EU approved MiCAR in April, becoming the world’s first comprehensive regulatory framework for trading cryptoassets and issuing stablecoins, the EBA anticipates a surge in stablecoin issuance over the coming months. In order to mitigate risks and ensure consumer protection, the EBA is urging businesses to adhere to its guiding principles on risk management and governance before the necessary restrictions are implemented.
The EBA statement emphasizes that voluntary adoption of these guiding principles encourages early preparations for MiCAR application. This approach aims to reduce the risks of abrupt business model adjustments in the future, foster supervisory convergence, and facilitate consumer protection.
Regulatory Developments
In another regulatory development, the European Securities and Markets Authority (ESMA) has proposed draft rules for crypto asset service providers (CASPs). These rules aim to authorize CASPs while maintaining the separation of customer assets and trading, thereby avoiding the mingling of customer and company funds.
However, the ESMA regulations do not include a compensation plan for customers who incur losses from investments in unbacked cryptoassets. These regulations will be effective from January 2025. Additionally, the EBA plans to release a second set of draft guidelines in October, addressing the capital requirements for stablecoin issuers and providing recommendations on managing stablecoin redemptions during volatile market conditions.
Overall, the proactive stance taken by the EBA and ESMA demonstrates the increasing regulatory focus on stablecoin issuance and crypto asset services within the European Union. By encouraging voluntary adoption of standards and introducing comprehensive regulations, authorities aim to foster a safer and more transparent environment for businesses and consumers operating in the cryptocurrency space.