EBA issues new MiCA guidelines for cryptocurrency regulation

The European Banking Authority has published a comprehensive set of technical standards and guidelines in line with the Cryptocurrency Markets Regulation (MiCA).

These guidelines aim to ensure transparency in the regulation of asset-based tokens (ARTs) and electronic money tokens (EMTs) across the European Union. The guidance focuses on various aspects, including stress testing programs, asset reserves and recovery plans. ARTs are tokens backed by assets such as commodities, real estate or a portfolio of various assets, while EMTs maintain a stable value by being pegged to fiat currencies and are used for payments, much like stablecoins.

Key provisions include requirements for token issuers to maintain sufficient financial resources (own funds) to mitigate potential risks. The EBA has established criteria for assessing higher-risk scenarios requiring increased own funds reserves.

The EBA reports set out the process and timeline for issuers to adjust their own funds to at least 3% of their average reserve of significant assets, with an implementation plan expected to be submitted within 25 working days and full compliance required within six months.

Additionally, the regulator sets minimum asset reserve percentages based on daily and weekly maturities and imposes restrictions on the concentration of issuers of highly liquid financial instruments. For tokens pegged to unofficial currencies such as commodities or real estate, similar limits apply to highly liquid assets.

Regarding recovery plans, the EBA takes into account feedback from the consultations to define communication and disclosure requirements. It clarifies that certain exemptions in the regulations already exclude EMT issuers from certain asset reserve obligations. These guidelines are an integral part of the implementation of the MiCA Regulation, and digital asset service providers are required to comply with the new standards by July 1, 2026.

A little knowledge about MiCA

The MiCA regulation, proposed by the European Parliament, aims to create a comprehensive framework for crypto assets in the European Union (EU). This initiative aims to address the lack of specific legal regulation for these assets in the EU, ensuring clear and consistent regulation.

MiCA’s primary objectives are to improve consumer and investor protection, promote financial stability and innovation, and support the adoption of crypto assets across the EU. The regulation divides crypto assets into three main types: asset-based tokens (ARTs), electronic money tokens (EMTs) and other assets not previously covered by EU rules.

Introduced in June 2023, the MiCA system was designed for phased implementation. The stablecoin regulations are expected to enter into force in June 2024, while the remaining regulatory provisions are expected to apply from December 2024, including special transitional measures.

In January 2024, the European Securities and Markets Authority (ESMA) published two consultation documents on guidance under the Crypto Assets Markets Regulation.