EU to discuss new liquidity requirements for stablecoins

The European Banking Authority (EBA) has published for public consultation capital and liquidity requirements for issuers stablecoins and other digital tokens. Reuters reports.

Under the proposal, issuers of currency-backed stablecoins must hold sufficient resources to fully settle their liabilities to investors at face value.

For commodity-backed stablecoins, such as those backed by gold, the calculation would be based on the asset’s market price at the time of redemption.

The new rules would ensure the swift sale of the coin even in a crisis. They would also prevent non-bank issuers of stablecoins from gaining unfair advantages in capital or liquidity relative to banks.

“The supervisory authority may tighten the requirements on the issuer to cover these risks based on liquidity stress testing results,” the EBA said.

Banks may be exempt from such requirements in some cases if they already have sufficient liquidity buffers under existing EU rules, the supervisory authority added.

All proposals are out for three months of public consultation, with public hearings scheduled for 30 January 2024.

In April, the European Parliament voted on a bill for comprehensive regulation of the crypto industry MiCA. The main provisions of the rules, including those relating to stablecoins, will come into force one year after adoption.

In July the EBA proposed to raise requirements on issuers of “stablecoins”, whose reserves consist of derivatives or covered bonds.

According to Moody’s Analytics, in 2023 high-capitalization stablecoins lost their peg to the underlying asset 609 times.