Jose Manuel Campa, the Chief of the European Banking Authority (EBA) asserted that the European Union’s (EU) upcoming stablecoin regulations will put a strong emphasis on making sure issuers have a variety of reserves, to manage conflicts of interest, and don’t transfer risks to other participants. Markets in Crypto Assets regulations, or MiCA, are expected to go into effect in 2024, but Campa, whose group is drafting subsidiary laws that will be crucial to their implementation, advised crypto market participants to start making adjustments to their operations now.
According to Campa, in his report for the Eurofi advocacy organisation, MiCA mandates that stablecoin issuers have sufficient reserves to handle market volatility. He stated, “The EBA will be paying special attention to diversification of the deposit component of the reserve.”
Although the legislation governing the licensing of wallet providers and exchanges has not yet been fully written in the statute book, he said that market players should already make adjustments to their operations in order to guarantee appropriate risk management. Since terraUSD had a severe collapse last year, regulators have been considering ways to control cryptocurrencies that are linked to the value of fiat currency or to other assets like gold.
Martin Moloney, the secretary general of the International Organisation of Securities Commissions, will shortly release a survey on crypto guidelines which is said to be finalised later this year. Moloney reflected during his report that, “The corporate structures, business models, and exposures of the main crypto market participants are not transparent.” In addition, he said that the three biggest so-called trading platforms clearly exhibit market concentration, which heightens risk.
As MiCA regulations are expected to take effect 12 to 18 months after the legislation is published in the Union’s Official Journal, which is projected to happen in June, the EU may become the first significant area with a thorough crypto law. After seeing the collapses that went on during the year, the union is bringing in these regulations to stabilise their foundations and not repeat the mistakes around. With the recent updates to their regulations on user identity and large transfers, this is yet another step forward towards creating a secure crypto system.