Given the expectation that has arisen in the European stablecoin market due to the implementation of the Regulation for the Cryptoasset Market (MiCA) as of July 1, the European Banking Authority (EBA) published a set of guidelines aimed at the sector.

These are technical standards on prudential issues, specifically referring to own funds, liquidity requirements and recovery plans. They will apply, both for the issuance of stable currencies (defined as electronic money tokens or EMT), and for those who issue asset-referenced tokens (ART), which are those backed by commodities , real estate or a basket of different assets. 

In a series of documents published on its official site on June 13, the EBA provides these companies with indications that focus on the need to have sufficient financial resources (own funds) to cover the potential risks of stablecoins.  

It also establishes parameters to determine whether an issuer faces a higher degree of risk, as a preamble to requiring an increase in the reserves of these own funds. In this way, it is planned to increase the requirements that issuers of this type of currencies must meet.  

The regulations stand out not only because they reduce the investment capacity of stablecoin reserves, but also increase from 2 to 3% the percentage that must be maintained in said reserves, also limiting the assets that are considered safe for investment. 

Additionally, general guidelines are set out for liquidity management, as well as to "seek minimum solvency, solidity of liquidity and diversification of the counterparties of bank deposits in the asset reserve."

In this sense, the concentration of highly liquid financial instruments of issuers  is limited.

The minimum amount of deposits in credit institutions that must be maintained in the reserve of assets related to tokens that are not significant and are referenced to official currencies must be maintained at 30% of the referenced amount, or 60% if the token is significant, and do not rise beyond this percentage. 

EBA guidelines package. 

To comply with all these parameters, the procedure that must be followed is explained, along with a schedule for issuers to adjust their own funds "to that 3% of the average reserve of assets classified as significant."  

It is established, consequently, that the implementation plan is presented in 25 business days and that compliance must be achieved in a maximum of six months. 

The procedures also require testing based on financial stress scenarios. Based on this, it is estimated that the competent authorities will increase the amount of own funds requirements of an issuer, taking into account the risk outlook and the results of stress tests. 

As the EBA statement explains, this set of technical standards was developed in cooperation with the 27-nation EU bloc. Organizations such as the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB) participated.  

Questions about MiCA grow

The package of standards presented by EBA is part of the rules that the authorities of each country must follow – although not immediately – in the process of implementing MiCA. 

The new guidelines are presented in a context in which, a few days after their entry into force, the status of some stablecoins pegged to the dollar is unclear. Although the company that issues the dominant currency, USDT, has already announced its difficulties in complying with the rules. 

As reported by CriptoNoticias, Tether CEO Paolo Ardoino said that the European Union's liquidity and reserve requirements for stablecoins will hinder the functioning of this type of currency. 

The idea is supported by Cristina Carrascosa, a Spanish lawyer specialized in the area of ​​cryptoassets, who questioned the new EBA rules package in X. 

He noted, in this regard, the uncertainty that exists around the MiCA framework for stablecoins, calling it “very strict and inflexible,” especially with the largest stablecoins on the market.