March 27, 2024
EU Proposes Liquidity Rules for Stablecoin Issuers
Latest Cryptocurrency News

EU Proposes Liquidity Rules for Stablecoin Issuers

The European Banking Authority (EBA), which acts as the banking watchdog for the European Union, has put forth a series of new guidelines directed at issuers of stablecoins. These guidelines have been introduced to set minimum capital and liquidity requirements for stablecoin issuers, ensuring the stability and safety of such digital assets within the financial system.

Furthermore, the EBA has introduced a mechanism for liquidity stress testing, which will serve as a rigorous examination of the issuer’s ability to meet redemption demands during stress or crisis situations. If the outcome of the liquidity stress testing reveals shortcomings or a lack of liquidity, the EBA, or the relevant competent authority or supervisor, may require the issuer to enhance its liquidity requirements to ensure that it maintains an adequate liquidity buffer.

Once approved, these guidelines are set to come into effect starting early in 2024. With these guidelines in place, the regulatory authorities will possess the authority to strengthen liquidity requirements for stablecoin issuers based on the results of the liquidity stress testing.

The application of these proposed liquidity rules specifically targets stablecoin issuers, which can include non-bank institutions. The aim is to ensure these issuers meet the same safeguard standards and do not enjoy any unfair capital or liquidity advantages over traditional banks.

Currently, the proposal is in the consultation phase, which means it is open to public input. The consultation phase is set to last for three months, during which interested parties, experts, and stakeholders can offer their insights and opinions on the proposed guidelines. A public hearing is also scheduled for January 30, 2024, as part of the consultation process.

Image by wirestock on Freepik

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