EBA Finalizes Standards for Crypto Asset Regulation

• The EBA’s draft standards under MiCA legislation require crypto issuers to conduct stress tests and maintain adequate reserves to manage financial stress scenarios.
• Issuers of ARTs and EMTs must meet specific liquidity requirements and have recovery plans in place, subject to oversight by competent authorities.
• These standards, developed with ESMA and the ECB, aim to establish robust regulatory frameworks for the EU’s crypto markets, ensuring stability and investor protection.

Issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs) must perform stress testing under the assumed financial stress scenarios. Competent authorities will have the authority to adjust their own funds requirements based on risk outlook and stress testing results.

The draft standards specify the criteria for assessing a ‘higher degree of risk’ and outline the procedure for competent authorities to determine the period for issuers to increase their own funds to meet higher requirements. Additionally, they set a minimum set of requirements for the design and implementation of stress-testing programs.

Moreover, the standards detail the procedure and timeframe for issuers to adjust their own funds when issuing significant ARTs or EMTs. They also establish liquidity requirements for reserve assets, including specific minimum percentages for daily and weekly maturities and minimum amounts of deposits in official currencies.

Furthermore, the standards specify highly liquid financial instruments eligible for liquidity coverage ratio (LCR) and set concentration limits for such instruments by the issuer. They also outline the minimum content of liquidity management policies and procedures, including measures for identifying, measuring, and managing liquidity risk, as well as contingency policies and mitigation tools.

In addition to the technical standards, the EBA has issued guidelines on recovery plans, specifying the format and content required for issuers to develop and maintain such plans. These guidelines aim to enhance clarity and streamline communication and disclosure procedures.

The development of these regulatory products aligns with the EBA’s ongoing efforts to promote a well-regulated market for asset-referenced and e-money tokens within the EU. The draft standards have been developed in close cooperation with ESMA and the ECB, in accordance with relevant articles of the MiCA regulation.

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