European regulators today redoubled their efforts to create a compliant blockchain industry within the confederation of 27 member states before its landmark MiCA rules come into force next year.
The EU’s top banking watchdog, the European Banking Authority (EBA), published a statement today containing clear and comprehensive non-binding “guiding principles” for stablecoin issuers operating within the bloc.
A related press release encourages relevant financial institutions to take “timely preparatory steps” to become compliant with the bloc’s MiCA legislation before their application date of 30 June 2024.
Today’s guidelines are essentially a dress rehearsal for MiCA, asking stablecoin issuers to adhere to practices of full transparency regarding their disclosure, business model, risk management, communications with authorities, and reserve, recovery, and redemption arrangements.
"MiCA is a commendable initiative in the European Union that aims to foster crypto innovation and adoption. It provides guidelines and requirements for issuers of stablecoins, such as Tether, to ensure transparency, consumer protection, and financial stability," a Tether spokesperson told Decrypt. "It is crucial for both new and existing projects to embrace regulation and seek clarity. This not only establishes a solid foundation but also shapes the implementation of decentralized technologies and blockchain in practical terms.”
The EBA’s statement reiterates that crypto assets will still technically be unregulated until MiCA comes into force, so consumers will not benefit from the rights and protections granted by the forthcoming legislation even if stablecoin issuers fully comply with the above principles.
EU securities regulator solicits feedback
Crypto was a hot topic in Brussels today, with the European Securities and Markets Authority (ESMA) also issuing a set of proposals applicable to Crypto Asset Service Providers (CASPs), a broad term encompassing exchanges, lenders, brokers, token issuers, and trading firms.
Today’s proposals are the first use of ESMA’s new powers under MiCA and constitute the first of three consultation packages, with the regulator opening the floor to feedback from crypto companies “in particular related to their authorization, identification and management of conflicts of interests.”
One of the regulator’s chief concerns in this first set of proposals is the avoidance of commingling of customer and company money to prevent another disaster like FTX.
The FTX exchange collapsed last November after it used customer funds to fill holes in the balance sheet of its sister company, the trading firm Alameda Research, after the latter took heavy losses from bad trades.
Under the regulations in traditional finance, there would have been an enforced separation between the two firms, however, in the unregulated world of crypto these lines are often blurred by unscrupulous actors.
ESMA’s second consultation package will be published in October this year.