EBA Releases Technical Standards and Guidelines for Crypto-Asset Markets Across Europe
Summary:
The European Banking Authority (EBA) has unveiled a comprehensive set of technical criteria and guidelines under the Markets in Crypto-Assets regulation. This package is designed to supervise asset-referenced tokens and e-money tokens across Europe. It covers stress tests, reserve assets, recovery plans, and guidelines for token issuers. Compliance with the new standards by digital asset service providers is mandated by July 1, 2026.
The European Banking Authority (EBA) has unveiled a complete set of technical standards and guideposts under the Markets in Crypto-Assets (MiCA) regulation. This aims to provide regulatory direction for asset-backed tokens and electronic money tokens across the European region. It covers a spectrum of six subjects, ranging from stress tests procedures to reserve asset provisions to recovery plans. Under MiCA, asset-referenced tokens are supported by commodities, property, or a diverse range of assets. On the other hand, e-money tokens maintain constant value as they are tied to physical currencies and are used for transactions, like a stablecoin.
The authority provides specific guidelines for token issuers which include maintaining adequate financial resources to safeguard against potential risks. It further sets a framework to determine if any issuer is exposed to a greater risk level, thereby warranting an increase in financial reserves.
EBA’s set of reports provide detailed information about how issuers can adjust their reserves to 3% of the average of significant assets within a specified time. They are required to submit their implementation plans within a 25-working-day period. They also need to comply with the provisions within a maximum of six months.
Moreover, the European regulatory body introduces minimum percentages for asset reserves calculated on daily and weekly maturities. It also places limits on the issuers’ concentration of highly fluid financial instruments. It establishes that the minimum bank deposits to be held in the reserve of assets corresponding to tokens that aren't significant and are linked to official currencies should be 30% of the referenced amount. If the token is deemed significant, the value is required to be 60%.
For tokens related to commodities or property assets instead of official currencies, they can also be categorized as highly liquid. Likewise, the EBA stipulates restrictions on the quantity of these highly liquid financial instruments which an issuer can provide.
In regards to recovery plans, the regulator is taking consultation period feedback into consideration and defining guidance for communication and disclosure. It also adds a new clause to clarify that asset reserve requirements don't apply to e-money token issuers already exempt by the law. These standard guidelines are integral to applying the MiCA regulation and agreeing with the updated standards is a must for digital asset services providers before July 1, 2026.
Published At
6/14/2024 12:24:33 AM
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