Guidelines for Liquidity and Capital Requirements
The European Banking Authority (EBA) has recently released guidelines that address liquidity and capital requirements for stablecoin issuers in compliance with the EU’s new Markets in Crypto Assets (MiCA) regulation.
One of the key provisions outlined by the EBA is the implementation of a liquidation stress test. In this test, issuers must maintain a full reserve of assets that are pegged to stablecoins. These assets must meet specific quality standards, ensuring the stability and reliability of the stablecoin.
The primary objective of these guidelines is to enable swift liquidation of assets in order to generate cash for redeeming stablecoin investments, even in highly volatile market conditions. This measure is crucial in preventing market panics and contagion crises.
The EBA emphasizes that following these guidelines will empower stablecoin issuers to effectively manage their reserve of assets. The agency also has the authority to adjust liquidity requirements based on the outcomes of the liquidity stress test, further addressing potential risks.
It’s worth noting that the guidelines proposal includes a potential exemption for banks. The EBA clarifies that banks may be exempted from certain liquidity requirements if they already adhere to existing EU bank capital and liquidity regulations. The intention behind this exemption is to ensure a level playing field for stablecoin issuers, preventing them from enjoying undue advantages over banks.
The proposal is currently in the consultation stage, allowing for feedback from observers and the general public. The consultation period will remain open until January 30, 2024.
