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Highlights
- MiCA finalizes crypto standards to stabilize EU's digital asset market.
- EBA sets rigorous liquidity and recovery rules for crypto issuers.
- Rising EUR-stablecoin use reshapes Europe's crypto landscape.
The European Banking Authority (EBA) has completed the draft of the technical standards for the prudential matters as per the MiCA regulation to make sure that all the firms in the EU adhere to the high financial standards.
This advancement is a positive step in the process of governing the fast-growing crypto industry, and comes after the implementation of MiCA last year.
Finalized MiCA Crypto Framework
The final draft of the technical standards outlines the measures that are considered prudent for crypto asset issuers and service providers. Some of these standards include, change in own funds requirements, changes in liquidity provisions and very strict recovery plans for the issuers of the crypto assets.
Notably, the criteria specify that the issuers of ARTs and EMTs must conduct stress tests in specific financial stress conditions. This measure helps the entities to manage their operations during the periods of market fluctuations.
In addition, the EBA outlines the process for competent authorities to impose enhanced financial requirements on issuers, depending on the risk outlook and results from the mandatory stress tests.
These regulatory technical standards (RTS) also provide for processes of issuers to make necessary adjustments to own funds so that they meet the increased standards within a given period, which has been set at 25 working days as of the recent changes made on the basis of public consultation.
Enhancing Financial Stability and Transparency
The RTS also provides more specific rules on the minimum level of liquidity of the crypto assets, specifying the required ratios of reserve assets by daily and weekly maturity. This way the issuers are in a position to fulfill their financial obligations even during the periods of stress.
The EBA has also provided certain prescriptions for managing highly liquid financial instruments such as concentration limits by issuers to address the risks of being exposed to single entities.
These detailed standards are anticipated to improve the financial soundness of the crypto market within the EU. To this end, the EBA has endeavored to ensure that the management of crypto assets is done in the right manner and with accountability through the imposition of detailed and consistent financial management practices.
MiCA Boosts EUR-Stablecoin Utilization
Looking at the general application of MiCA, the EUR-stablecoins have found their way into the market and are posing a threat to the USDT which has previously dominated the European market.
This has been enabled by the legal certainty and protection of consumers provided under MiCA for EUR-stablecoins and thus more appealing to investors and general public.
Thus, the use of EUR-stablecoins is anticipated to stay on the rise, given the increasing use of the assets in euro-based transactions and the further development of related services and products. This trend not only reflects the growing confidence in digital currencies but also underscores the effectiveness of the MiCA framework in fostering a secure and thriving digital asset market in Europe.
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