European Banking Authority Calls for Early Adoption of Stablecoin Standards
European regulators have been quite steadfast in bringing regulations for the crypto industry. The swift introduction of the Markets in Crypto Assets Regulation (MiCAR) has been a testament to this.
In the latest, the European Union’s banking watchdog has urged stablecoin issuers to voluntarily comply with consumer protection and risk management, in a year’s time. On Wednesday, July 12, the European Banking Authority (EBA) published its first batch of measures fleshing out the MiCAR requirements coming into force a year from now.
In April this year, the EU approved MiCAR, providing the first comprehensive set of rules for trading cryptocurrencies such as Bitcoin and Ether. The MiCAR requirements also talk about issuing a stablecoin, a cryptocurrency backed by fixed-value assets like fiat currencies.
EBA Measures for Stablecoin Issuance
The EBA measures put forward include provisions such as permanent rights of redemptions, as well as handling complaints. With the MiCAR framework law approved, EBA officials are expecting a flurry of stablecoin issuance over the next few months.
Furthermore, they have called on firms to use their guiding principles on risk management and good governance, before the mandatory rules kick in. In its official statement, the EBA noted:
“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”.
In another regulatory development, the EU’s European Securities and Markets Authority (ESMA) has set out draft rules for crypto asset service providers (CASPs). These rules seek to authorize CASPs while ensuring the separation of customer assets and trading. The goal is to avoid any kind of co-mingling of customer money and company money, as we saw in the case of FTX.
The ESMA rules shall come into force by January 2025. However, it won’t include any compensation for customers who lose money invested in unbacked crypto assets.
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