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Europe unveils new requirements for crypto and stablecoins

New EU Crypto Law: Appropriate or Dangerous?

The European Union passed the Markets in Crypto-Assets (MiCA) legislation in April. It was an important step that put Europe on the map in the crypto industry, but it was not clear what exactly the requirements for companies meant. Now the European Banking Authority (EBA) and the European Securites and Markets Authority (ESMA) have changed that.

New requirements for stablecoins

In a press release the EBA has announced that financial institutions that issue stablecoins must handle clients’ assets responsibly and respect their rights. The companies must also maintain enough reserves to guarantee the value of the stablecoins issued. Furthermore, there must be enough liquidity to guarantee the buying and selling of stablecoins.

At the same time, the EBA emphasizes that the aforementioned measures are guidelines for the time being and are therefore not legally binding. However, this will only apply until 30 June 2024, after which the measures are required by law and not just guidelines.

EU: Crypto Industry Must Behave

Meanwhile, ESMA has one 158 page report issued in which it made proposals for regulating the rest of the crypto industry. For example, crypto exchanges, like stablecoin issuers, must handle client assets responsibly. This measure has its origins in the fall of FTX. This trading platform went bust last year after it turned out that customer money was reused by FTX itself for its own purposes.

The industry has until September 20 this year to comment on the requirements. This will be included in a report to be published in October. The final rules should be on the table at the beginning of 2024.

The ESMA also wants to know from crypto companies how much turnover they make, how many white papers they have and whether they trade in crypto themselves. This will have to do with the conflict of interest mentioned above. They must also indicate whether they themselves possess confidential information.

Early next year we will also find out when a cryptocurrency has the characteristics of a security (read: a regular share or bond) and how foreign companies are allowed to serve customers in the EU.

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