EBA Discusses Proposed Guidelines for Stablecoin Issuers

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European banking regulators have urged stablecoin issuers and other stakeholders to dialogue with regulators ahead of proposed stablecoin rules under the Markets in Crypto Assets (MICA) regulation.

EBA Calls for Synergy Between Stakeholders and Regulators

The European Banking Authority (EBA) at a Jan 11 public hearing organized to examine the proposed regulations on stablecoins rolling out under the MICA framework.

In line with global standards, the financial regulators called for improved synergy between stakeholders in the sector and regulators to produce the perfect template to guide operational practices in the market.

#EBA consultation on requirements for policies and procedures on conflicts of interest for issuers of asset-referenced tokens (ARTs) under #MiCAR.

Aim: strengthen the management of conflicts of interest, ensure convergence of requirements across the #EUhttps://t.co/QRYWaaTonFpic.twitter.com/g76MC0VwyM

— EU Banking Authority – EBA (@EBA_News) December 7, 2023

The EBA outlined proposed rules for stablecoins to all participants which it describes as asset reference tokens (ARTs) because they reference one or more assets to the underlying assets to maintain stability.

Officials for the regulators stressed the importance of getting public feedback in shaping the entire landscape and are set to expand public consultations in the coming weeks until the final implementation.

Isabel Vaillant, an EBA director, highlighted at the hearing that the dialogue and resolutions reached in this batch will help both parties start on the right footing stating other benefits of the public hearing.

“We pay high attention to this batch and need also a very good understanding with you, so please seize this public hearing as an opportunity to dialogue with us so we start on the right footing.”

All hands on deck for MiCA  

The hearing witnessed a proper explanation of the first batch of rules for issuers as guided by MiCA which includes compliance by firms, fees collected, and periodic disclosures to aid authorities to protect investors and to avoid all possible conflicts of interest.

The European Union moved ahead of all jurisdictions with the passage of MiCA in 2023, which seeks to provide the first landmark industry regulation to guide the affairs of licensing, exchange operations, stablecoin issuers, etc.

Within the scope of the law, digital asset firms must register within the union to offer services to customers and must make all relevant disclosures to regulators to protect investors and prevent money laundering and other related activities.

Since the passage of the law by member states, regulators such as EBA and the European Securities and Markets Authority (ESMA) kicked off policy engagement duties to coin proper stablecoin and wider industry rules. The EBA is responsible for rolling out rules under MiCA for stablecoin issuers.

The body released a draft in November 2023 on how ARTs should structure risks and for adverse scenarios which they should have one recovery option to strengthen capital position and one to improve the issuer’s liquidity position.

“All issuers should include a de-pegging risk indicator, aimed to keep track of the alignment between the market price of the token and the market value of the referenced asset.”

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