Key takeaways:
- Under the MiCA regulation, the EBA has published a complete set of technical standards and guidelines that offer regulatory guidance for EMTs and ARTs throughout Europe.
- Six subjects are covered in the topics, ranging from asset buffers and stress testing programs to recovery strategies.
Under the Markets in Crypto-Assets (MiCA) regulation, the European Banking Authority (EBA) has published a complete set of technical standards and guidelines that offer regulatory guidance for e-money tokens (EMTs) and asset-referenced tokens (ARTs) throughout Europe.
The set includes six topics: asset reserves, stress testing programs, recovery strategies, and more.
MiCA defines ARTs as tokens that are backed by assets such as real estate, commodities, or a collection of various assets, whereas EMTs, which function as stablecoins when used for payments, are based on fiat currencies and have a fixed value.
The authority specifically offers token issuers instructions, such as the requirement to have sufficient financial resources (own funds) to cover potential risks. Additionally, it establishes criteria for figuring out whether an issuer is exposed to more risk, which ought to raise its own fund reserves.
The process and timeline for issuers to modify their own funds to 3% of the average reserve of assets that are deemed substantial are outlined in EBA’s reports. Within 25 working days, the implementation plan must be delivered, and compliance must be attained in no more than six months.
Furthermore, the European Commission restricts issuers’ concentration of highly liquid financial products and sets minimum percentages for asset reserves based on daily and weekly maturities. According to one of the draft reports:
“The minimum amount of deposits with credit institutions to be held in the reserve of assets related to tokens that are not significant and are referenced to official currencies should be kept to 30% of the amount referenced, or to 60% if the token is significant, and not raised any higher”
Highly liquid tokens are also connected to assets other than official currencies, such as real estate or commodities. The quantity of these extremely liquid financial products that a single issuer is permitted to provide is also limited by the EBA.
Regarding recovery plans, the regulatory body integrates input received during the consultation phase, defining what must be disclosed and communicated. Additionally, a new phrase is included to clarify that EMT issuers currently exempt from the law are not subject to the rules on asset reserves.
The standards guidelines are a component of the implementation of the MiCA regulation. Providers of digital asset services have until July 1, 2026, to meet the new requirements.
