The European Banking Authority (EBA) has advised stablecoin issuers to prepare for the forthcoming Markets in Crypto-Assets (MiCA) regulation, which is scheduled to be implemented next year, as noted in a statement released on July 12.

The financial watchdog encouraged the stablecoin issuers to act quickly and voluntarily comply with the guiding principles for consumer protection and risk management before the mandatory rules arrived.

In the statement, EBA touched on issues including disclosure to buyers, a well-defined business model, sound governance and risk management proportional to the activities, reserve and redemption arrangements, and constant communication with authorities. The regulator said:

“Financial institutions (and other undertakings) are encouraged to carry out a comprehensive legal assessment to determine if the activities are legally permissible and, if so, under what legal, regulatory and supervisory (if any) conditions in the jurisdiction(s) concerned.”

Meanwhile, EBA plans to issue draft rules on how stablecoin issuers should handle redemptions under stress and capital requirements.

The MiCA regulation would require stablecoin issuers to be licensed by at least one financial regulator in an EU member state as part of its efforts to ensure European financial stability and consumer protection.

The regulation of the crypto industry remains in full swing in Europe as the European Securities and Markets Authority (ESMA) is also working on draft regulations for the crypto industry. The rules will apply to crypto assets service providers (CASPs), and it is set to become effective in January 2025.

The proposed rules will ensure that the crypto exchanges separate customers’ assets and do not commingle funds.

However, trading cryptocurrencies will remain risky as the regulator does not plan to include any compensation plan for customers who suffer losses from investing in unbacked assets.

The post European Banking Authority urges stablecoin issuers to comply with upcoming MiCA regulation appeared first on CryptoSlate.

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