EU Watchdog Wants Stablecoin Issuers to Adopt EU Rules Early Before 2024 MiCAR Implementation
The European regulators have been at the forefront of implementing regulatory framework for the crypto industry, and way ahead in comparison to other global economies.
Earlier this year in April, the European Union approved the Markets in Crypto Assets Regulation (MiCAR), which are the world first comprehensive set of rules for trading cryptocurrencies and issuing stablecoins.
On Wednesday, July 12, the European Union's banking watchdog aka the European Banking Authority (EBA) urged all stablecoin issuers to comply with the guiding principles on managing risks and consumer protection.
The EBA wants that all stablecoin issuers should adopt these rules ahead of the mandatory 2024 EU rules implementation. The European Banking Authority (EBA) has published its first batch of measures to flesh out the MiCAR requirements for issuing a stablecoin. The measures, which include a permanent right of redemption and rules for handling complaints, will come into force on June 30, 2024.
EBA officials expect a flurry of stablecoin issuance in the coming months, now that the framework law has been approved. They have called on firms to use the EBA's guiding principles on good governance and risk management ahead of the mandatory rules.
In their official statement, the EBA noted: “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”.
The European Securities and Markets Authority (ESMA) has published draft rules for crypto asset service providers (CASPs) who trade cryptocurrencies. The rules aim to protect customers by ensuring that CASPs are authorized and that their customer cryptoassets are kept separate from the company's money. The rules will come into force in January 2025, but they will not include a compensation scheme for customers who lose money invested in unbacked cryptoassets.
The European Banking Authority (EBA) will issue a second batch of draft rules in October that focus on capital requirements for stablecoin issuers and how firms should deal with stablecoin redemptions in stressed markets.
The Markets in Crypto-Assets (MiCA) legislation has been welcomed by the crypto industry, as it provides much-needed regulatory clarity. Some believe that MiCA could attract more crypto players to set up base in the European Union, as the United States has been struggling to bring clear regulatory measures to the table. The recent crackdown by US regulators has also served as a deterrent for local players, who are now looking to shift base overseas.