EU banking watchdog proposes liquidity guidelines for stablecoin issuers

The European Banking Authority (EBA) — the European Union’s banking watchdog — has proposed a brand new set of guidelines for stablecoin issuers that may set minimal capital and liquidity necessities.

The brand new liquidity tips goal to make sure the stablecoin might be shortly redeemed even throughout turbulent market situations to keep away from the danger of financial institution runs and contagion in a disaster.

Beneath the proposed liquidity tips, stablecoin issuers should supply any stablecoin backed by a forex that’s absolutely redeemable at par to buyers. The official proposal by EBA famous that the stablecoin liquidity tips will act as a liquidity stress check for stablecoin issuers.

EBA believes the stress check will spotlight any shortcomings and lack of liquidity for the stablecoin, which can assist EBA to solely approve absolutely backed stablecoins with sufficient liquidity buffer.

“The liquidity stress testing will assist issuers of tokens to raised handle their reserve of property and customarily their liquidity threat. Primarily based on the end result of the liquidity stress testing, the EBA or, the place relevant, the related competent authority/supervisor, might resolve to strengthen the liquidity necessities of the issuer,” the official proposal learn.

As soon as accepted, the proposal is about to return into impact from June to early subsequent yr. After implementing the rules, the authorities could have the facility to strengthen the liquidity necessities of the related issuer to cowl these dangers primarily based on the end result of the liquidity stress testing.

Associated: Binance plans to delist stablecoins in Europe, citing MiCA compliance

The proposed liquidity guidelines are geared toward issuers of stablecoins, which might be non-bank establishments, meet the identical safeguards, and keep away from unfair capital or liquidity benefits over banks. At present, the proposal is within the session section, the place the widespread public can provide their enter. The general public session section is open for 3 months till a public listening to is scheduled on Jan. 30, 2024.

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