European Banking Authority Proposes New Liquidity Guidelines for Stablecoin Issuers

According to Cointelegraph, the European Banking Authority (EBA) has proposed a set of new guidelines for stablecoin issuers, aiming to establish minimum capital and liquidity requirements. The purpose of these guidelines is to ensure that stablecoins can be quickly redeemed even during turbulent market conditions, preventing the risk of bank runs and contagion in crisis situations. Under the proposed guidelines, stablecoin issuers must offer any stablecoin backed by a currency that is fully redeemable at par to investors. The EBA believes that the liquidity stress testing will help issuers better manage their reserve of assets and liquidity risk. Based on the outcome of the liquidity stress testing, the EBA or the relevant competent authority/supervisor may decide to strengthen the liquidity requirements of the issuer. The proposal is set to come into effect from June to early next year, and once implemented, authorities will have the power to strengthen the liquidity requirements of the relevant issuer based on the outcome of the liquidity stress testing. The proposed liquidity rules target issuers of stablecoins, including non-bank institutions, to meet the same safeguards and avoid unfair capital or liquidity advantages over banks. The proposal is currently in the consultation phase, with the public able to provide input for three months until a public hearing scheduled on January 30, 2024.