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- 1 EBA urges stablecoin issuers to be ready to adopt European Union’s MiCA.
- 2 Stablecoin regulations will be applicable from June 30, 2024.
The European Banking Authority (EBA) urged stablecoin issuers to be proactively ahead of upcoming European Union MiCA regulations. The EBA incited stablecoin issuers on July 12, 2023, to preemptively comply with the ‘guiding principles’ regarding consumer protection and risk management as the rules regarding stablecoins shall be effective from June 30, 2024.
European Union’s EBA Wants Stablecoin Issuers to Adopt Stablecoin Standards Proactively
E.U.’s upcoming Market in Crypto Asset (MiCA) regulations shall be effective from December 30, 2024. It was published in the Official Journal of the European Union (OJEU) on June 9, 2023, and after 20 days period on June 29, 2023, select rules became applicable.
Nearly six months before the full implementation on December 30, 2024, rules regarding stablecoins shall be applied on June 30, 2024. The EBA published a public consultation on July 12, 2023, to inform stablecoin issuers of MiCA requirements before it becomes effective.
The public consultation includes provisions such as a permanent right of redemption and rules on handling complaints. EBA officials expect stablecoin issuers to line up for compliance as the framework has already been approved. The authorities request the firms use their guiding principles on risk management and good governance before MiCA implementation.
However, experts agree that the initial draft wishes to implement a daily cap on stablecoin transactions. The upper ceiling of 200 Million Euro ($219 Million) is in the cards for now. Crypto lawyers argue that the limitations could discourage users from using stablecoins.
With its statement, the EBA wants to encourage stablecoins issuers to be proactive and adjust their modules accordingly. This would benefit them as it shall avoid last-minute changes at a later stage. Also, the authority wants a seamless implementation of MiCA regulations.
European Union’s European Securities and Markets Authority (ESMA) is working on draft rules for Crypto Asset Service Providers (CASPs), which trade cryptocurrencies. These proposed public consultation rules aim to authorize CASPs and avoid co-mingling of companies’ and users’ money.
The ESMA rules will be effective in January 2025. However, they would not include any compensation scheme for customers who have lost their investments in unbacked crypto assets. In October 2023, EBA will issue the second draft batch focusing on capital requirements for stablecoin issuers.
Last month, Chainalysis’ policy head for E.U. Janet Ho, in a webinar, urged the crypto industry to be proactive towards the adoption of MiCA. Shedding some light on obtaining a license, Janet argued that preparedness would benefit the crypto companies.
Any Crypto company wanting a license must apply with the corresponding authority in any of the 27 member countries. The authority would inform the applicant in 25 working days regarding any missing information. In another 60 days, the company will be informed about the final state of its application.
Experts believe that after the rules are fully applicable, the companies will line up for applications. This could further delay the application acceptance procedure. Another benefit would be that a license from one member nation will be acceptable across the E.U. Another use to apply for the MiCA.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
