The European Banking Authority (EBA) has encouraged stablecoin issuers to voluntarily follow certain “guiding principles.” Before MiCA rolls out next year, the rules serve as norms to mitigate crypto risks and safeguard consumers.
The Markets in Crypto Assets regulation (MiCA), passed by the EU in April, will go into effect in 2024.
Voluntary Guidelines Ahead of MiCA
The EBA released its first set of measures on Wednesday for public comment to clarify the MiCA requirements for issuing a stablecoin. The EU depended on pre-existing anti-money laundering (AML) laws before the introduction of MiCA.
According to reports, now that the MiCA framework has been authorized, EBA officials anticipate a surge of stablecoin issuance. They have urged businesses to adhere to its guiding principles for good governance and risk management before MiCA comes into effect.
Read our explainer on how a token economy might pan out in Europe: A Token Economy for Europe: Considering the Opportunities
The EBA’s statement on the framework reads,
“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.”
Second Set of Rules in October
The EBA will reportedly release a second set of regulations in October. It will address the capital needs of stablecoin issuers and how businesses should handle stablecoin redemptions in volatile markets.
Regulators continue to face difficulties with stablecoins because of their growing use. Speculators also use stablecoins for trading in other crypto-assets.
Recently, the state of New York introduced new legislation that would permit fiat-collateralized stablecoins for bail.
Meanwhile, Hong Kong introduced its licensing system for Virtual Asset Service Providers (VASP) and could now focus on regulating stablecoin issuers.
