The European Union’s banking watchdog, the European Banking Authority (EBA), has called on stablecoin issuers to voluntarily comply with ‘guiding principles’ for risk management and consumer protection. This comes ahead of mandatory rules, which will be implemented in a year’s time. The EU’s approval of the Markets in Crypto Assets Regulation (MiCAR) in April marked a significant milestone as the world’s first comprehensive set of rules for trading cryptoassets and issuing stablecoins. The EBA has now published its first set of measures to outline MiCAR requirements, set to take effect on June 30, 2024.
These measures include provisions such as a permanent right of redemption and rules for handling complaints. Although the mandatory rules are not in effect yet, EBA officials anticipate a surge in stablecoin issuances in the coming months. As a result, the EBA is urging firms to adopt its guiding principles on good governance and risk management to minimize potential disruptions and ensure consumer protection.
The EBA stated, “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 a separate development, the European Securities and Markets Authority (ESMA), which oversees securities markets in the EU, has proposed draft rules for crypto asset service providers (CASPs) involved in cryptocurrency trading. These rules aim to authorize CASPs and enforce the separation of customer cryptoassets and trading activities. The objective is to prevent the co-mingling of company and customer funds, drawing lessons from previous events such as the collapse of the US crypto exchange FTX.
The ESMA rules, currently open for public consultation, are scheduled to come into force in January 2025. However, they do not include a compensation scheme for customers who lose money invested in unbacked cryptoassets.
The EBA plans to release a second set of draft rules in October, which will focus on capital requirements for stablecoin issuers and how firms should handle stablecoin redemptions during stressed market conditions.
(Reporting by Huw Jones; Editing by Paul Simao)
Credit: The Star : Tech Feed
