Issuers of stablecoins should take immediate measures to comply with new European Union crypto regulations that come into effect a year from now, the European Banking Authority said.
(Bloomberg) — Issuers of stablecoins should take immediate measures to comply with new European Union crypto regulations that come into effect a year from now, the European Banking Authority said.
The EBA expects issuers of stablecoins — tokens that are pegged to an asset like the US dollar — to have sound governance and effective risk management in addition to proper arrangements for handling redemptions, among other things, the watchdog said in a statement on Wednesday.
Under the EU’s Markets in Cryptoassets (MiCA) regulation, stablecoin operators will be required to hold a license from a national financial regulator in at least one member state by June 2024.
Making preparations to comply with the rules ahead of time will help avoid “potentially disruptive and sharp business model adjustments at a later stage,” the EBA said. The watchdog on Wednesday started the first in a series of consultations on its proposed guidelines, which cover areas such as investing in stablecoin issuers.
Read more: How Europe Wants to Impose Some Order on Crypto World: QuickTake
Stablecoins are digital tokens that rely on reserves of assets to maintain a one-to-one redemption value with a less volatile asset like the dollar. Under EU rules, assets like Circle Internet Financial Ltd.’s USDC that use a reserve denominated in a single currency are considered electronic money tokens. Stablecoins based on a basket of different assets — like crypto-backed stablecoin DAI — are referred to as asset-referenced tokens.
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