The European Banking Authority (EBA) has proposed extra rules for European stablecoin issuers if their reserves have a lot of derivatives or covered bonds. According to the Markets in Crypto Assets regulation (MiCA), any stablecoins deemed to be overly connected to the financial system will face extra capital requirements and centralized supervision by the European Union (EU).
Financial distress at one ART [asset-referenced token] or EMT [e-money token] issuer can materially increase the likelihood of distress at other issuers of crypto-assets or at other financial institutions given the network of contractual obligations in which issuers operate, said the document.
The EBA has set out tentative indicators such as the share of assets held in the reserve issued by other regulated financial institutions other than deposits, and the market share of cross-border payments, alongside already legislated metrics such as the number of users and market capitalization.
Under MiCA, stablecoins deemed significant will be supervised by the EBA rather than national regulators, must carry out extra stress tests, and must have their own funds equal to 3% of their reserve rather than the usual 2%.
MiCA also lets crypto wallet providers and exchanges operate across the bloc with a single license, and its stablecoin provisions take effect in June 2024. Rules designed to tackle the risks posed by large-scale projects like the now-abandoned Libra/Diem project include a controversial cap on the use of digital payments that become so widely used as to supplant the euro.