The European Banking Authority (EBA) recommended stablecoin issuers to get ready for the upcoming MiCA regulation.
Before the necessary regulations took effect, the financial watchdog urged the stablecoin issuers to take immediate action and voluntarily adhere to the guiding principles for consumer safety and risk management.
EBA touched on a number of topics in the statement, including buyer disclosure, a clear business model, good governance and risk management appropriate to the operations, reserve and redemption arrangements, and ongoing coordination with authorities. The watchdog stated:
“Financial institutions (and other undertakings) are encouraged to carry out a comprehensive legal assessment to determine if the activities are legally permissible and, if so, under what legal, regulatory and supervisory (if any) conditions in the jurisdiction(s) concerned.”
In the interim, EBA intends to publish proposed regulations on stablecoin issuers’ handling of redemptions under pressure and capital requirements. As part of its attempts to guarantee European financial stability and consumer protection, the MiCA rule would require stablecoin issuers to hold licenses from at least one financial regulator in an EU member state.
Regulation of cryptocurrencies in Europe
The European Securities and Markets Authority (ESMA) is working on draft legislation for the cryptocurrency industry. Therefore the regulation of the sector is still very much in progress in Europe.
In January 2025, the regulations, which will apply to crypto assets service providers (CASPs), are expected to take effect. The new regulations will ensure that cryptocurrency exchanges keep customer assets separate and do not combine monies.
Trading cryptocurrencies will still be perilous, though, as the agency has no plans to offer any protection to users who lose money on unbacked investments.
