Liquidity Rules For Stablecoin Issuers in EU
The European Banking Authority (EBA) has proposed new liquidity guidelines for stablecoin issuers to ensure quick redemption during market turmoil and prevent bank runs and contagion.
The guidelines will act as a liquidity stress test, highlighting any shortcomings and lack of liquidity for the stablecoin.
The stress test will help issuers manage their asset reserve and liquidity risk. The EBA or relevant competent authority/supervisor may decide to strengthen the issuer’s liquidity requirements based on the outcome of the testing.
The proposal will come into effect from June to early next year, and after implementing the guidelines, authorities will have the power to strengthen the issuer’s liquidity requirements to cover risks based on the results of the stress testing.
The guidelines are aimed at non-bank institutions, meeting the same safeguards and avoiding unfair capital or liquidity advantages over banks.
The public consultation phase is open for three months until a public hearing is scheduled on January 30, 2024.
(With inputs from Shikha Singh)
You need to login in order to Like
