EU Banking Watchdog Seeks Feedback on Draft Liquidity, Capital Rules for Stablecoin Issuers

The European Banking Authority (EBA) has published draft rules on liquidity and capital requirements for stablecoin issuers in line with the EU's new Markets in Crypto Assets (MiCA) regulation.

The landmark MiCA framework focuses heavily on supervising stablecoin issuers. It sets strict reserve requirements for stablecoin issuers and restricts the circulation of foreign currency-denominated stablecoins in the EU.

The EBA consultations published Wednesday – which form part of the third batch of policy products under MiCA – follow calls from the banking authority for stablecoin issuers to anticipate MiCA rules set to apply in December next year. The guidelines cover a range of requirements, including regular liquidity stress testing for large stablecoin issuers, and capital and liquidity requirements for stablecoin reserve assets.

"Through recovery planning, issuers of ART [asset-referenced token] or EMT [e-money token] should prepare in advance to face adverse scenarios that may impact their ability to comply with the regulatory requirements applicable to the reserve of assets," the watchdog said.

CoinDesk reported in June that the EBA was planning extra rules for stablecoin issuers that have bank asset reserves. The EBA consultations confirmed it will supervise stablecoins classified as "significant" and must have own funds equal to 3% of their reserve rather than the usual 2%.

Guidelines in the consultations package include criteria to be used for "deciding 'the most relevant' custodians of the reserve of assets, trading platforms, payment service providers providing payment services in relation to the significant EMTs and crypto-assets service providers providing custody and administration of crypto-assets on behalf of clients" as well as conditions under which ARTs and EMTs could be considered as widely used in a member state "for the purpose of determining the composition of a supervisory college" under MiCA.

The EBA said it will consult on the proposals until Feb. 8, 2024 with a public hearing scheduled for Jan. 30.

UPDATE (Nov. 8, 12:55 UTC): Adds more detail from consultations throughout.