EU Banking Authority recently finalized the MiCA Crypto Framework to improve crypto market stability and increase EUR-stablecoin adoption.
To ensure that all firms in the EU comply with the high financial standards, the European Banking Authority (EBA) has finalized the draft of the technical standards for prudential matters by the MiCA regulation.
This development is a positive development in regulating the rapidly expanding crypto industry and follows the implementation of MiCA last year.
Completed MiCA Crypto Framework
The technical standards’ final draft delineates the precautionary measures deemed prudent for service providers and issuers of crypto assets. These standards encompass modifications to liquidity provisions, modification of own funds requirements, and the implementation of highly stringent recovery plans for the issuers of crypto assets.
It is important to note that the criteria mandate that the issuers of ARTs and EMTs must conduct stress tests under specific financial duress conditions. This measure assists entities in the management of their operations during periods of market fluctuations.
In addition, the EBA delineates the process by which competent authorities may impose heightened financial requirements on issuers, contingent upon the results of the mandatory stress tests and the risk outlook.
These regulatory technical standards (RTS) stipulate that issuers must implement the requisite modifications to their funds to satisfy the heightened standards within a specified timeframe. As of the most recent changes implemented in response to public consultation, this timeframe is 25 working days.
Improving Financial Transparency and Stability
The RTS also specifies the requisite ratios of reserve assets by daily and weekly maturity and the minimum level of liquidity of the crypto assets. This action ensures that the issuers can meet their financial obligations, even during periods of duress.
The European Banking Authority (EBA) has also established specific guidelines for managing highly liquid financial instruments, including imposing concentration limits by issuers to mitigate the risks of exposure to single entities.
These comprehensive standards anticipate enhancing the financial stability of the crypto market in the EU. To this end, the EBA has made a concerted effort to guarantee that the management of crypto assets is conducted responsibly and ethically by enforcing comprehensive and consistent financial management practices.
MiCA Enhances the Utilization of EUR-Stablecoin
The EUR-stablecoins have entered the market and are now a threat to the USDT, which has previously dominated the European market when considering the general applicability of MiCA.
This is due to the legal certainty and consumer protection that MiCA provides for EUR-stablecoins, which makes them more appealing to the general public and investors.
Consequently, it is anticipated that the utilization of EUR-stablecoins will continue to increase due to the escalating use of these assets in euro-based transactions and the ongoing advancement of associated services and products. This trend demonstrates the increasing confidence in digital currencies and emphasizes the MiCA framework’s efficacy in cultivating a secure and flourishing digital asset market in Europe.
