European Banking Authority Set to Discuss New Liquidity Requirements for Stablecoins

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The European Banking Authority (EBA) has initiated a public consultation process regarding the capital and liquidity requirements for issuers of stablecoins and other digital tokens, as reported by Reuters.

According to the proposed guidelines by the EBA, issuers of currency-backed stablecoins must maintain enough funds to fully reimburse investors at the stated value.

For stablecoins backed by commodities like gold, the calculation of these funds will depend on the market price of the asset at the time of buyback.

These new regulations aim to ensure the ability to sell coins quickly, even during times of crisis. Furthermore, they aim to prevent non-bank institutions issuing stablecoins from gaining an unfair capital or liquidity advantage over traditional banks.

“The supervisor may require the relevant issuer to increase its collateral to cover these risks, based on the results of a liquidity stress test,” stated the EBA in a press release.

In some cases, banks may be exempt from these requirements if they already possess adequate liquid reserves under existing EU regulations, added the regulator.

All proposed guidelines are open to public consultation for a period of three months, and public hearings will be held on January 30, 2024.