European Banking Authority has new rules for stablecoin issuer recovery plans

Under MiCA, the EBA’s extensive proposal outlines how stablecoin and cryptocurrency issuers should think about risk and plan for recovery options in the event of catastrophe


nitpicker/Shutterstock modified by Blockworks


The European Banking Authority released draft guidelines for stablecoin issuers Wednesday, per a mandate under the recently passed Markets in Crypto-Assets Regulation (MiCA) policy. 

In its proposal, the EBA outlines how issuers of stablecoins — which the regulator refers to as asset-reference tokens (ARTs) — and other cryptocurrencies should structure their risk management and recovery plans. 

“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,” the draft reads. 

The regulator stipulated that in response to “adverse scenarios” potentially affecting a company’s adherence to regulatory standards, there must be prepared measures in place to ensure token holders are fully compensated.

“Issuers should include at least one recovery option that would strengthen the capital position and one recovery option aimed at improving the liquidity position of the issuer,” the EBA suggests. 

Similar to draft laws making their way through the US legislature, the EBA’s proposal includes mandates on stablecoin reserves. Reserve assets should be liquid, ample and low-volatility, the EBA suggests, adding that an issuer’s recovery plan is dependent upon the nature of its reserves. 

The “liquidity profile” of reserve assets should also be monitored regularly, per the EBA’s draft. 

The draft comes months after the European Union voted to advance MiCA by a 13:1 margin. While the sweeping regulatory package has been hailed by many as the most comprehensive of its kind, it still leaves a significant portion of the crypto industry — decentralized finance — out. 

“[Excluding DeFi] was a conscious political decision by EU policymakers when negotiating MiCA given the small size of the nascent market and a desire to see the market evolve and become more understood before deciding on how it should be regulated,” Mark Foster, the EU policy lead at the Crypto Council for Innovation told Blockworks in October. 

“If there are risks that have been identified, they can propose legislation at a later stage for the EU to then potentially develop something on DeFi in the course of the next Parliament,” Foster added. 

The comment period for the draft consultation ends on Feb. 8. Interested parties are also invited to attend a public hearing on Jan. 30, the EBA announced.

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