EBA publishes regulatory package under the Markets in Crypto-Assets Regulation

The European Banking Authority (EBA) publishes today the package of technical standards and guidelines under MiCAR on prudential matters, namely own funds, liquidity requirements, and recovery  plans. These products are part of the EBA’s ongoing efforts to foster a well-regulated market for asset-referenced and e-money tokens in the EU.

The package of EBA regulatory products comprises:

• Final draft regulatory technical standards specifying adjustment of own funds requirement and minimum features of stress testing programmes of issuers of asset-referenced tokens (ARTs) and of e-money tokens (EMTs) subject to such requirements. These standards specify: i) the criteria for the assessment of ‘higher degree of risk’, ii) the procedure for competent authorities to determine the period of time considered appropriate for issuers to increase the own funds amount to the higher own funds requirements and the measures to be taken to ensure the timely compliance thereof and iii) a minimum set of requirements to issuers for the design and implementation of their stress-testing programmes.
• Final draft regulatory technical standards specifying the procedure and timeframe for an issuer to adjust the amount of its own funds to 3% of the average amount of the reserve of assets when the relevant issuer is issuing an ART or EMT classified as ‘significant’. Considering the feedback received on both RTSs, following the consultation period, the timeframe for the issuer to provide an implementation plan to increase the own funds requirements has been changed to 25 working days. Additionally, the maximum amount of time that the competent authority may grant to the issuer to comply with the plan has been adjusted upwards to 6 months maximum.
• Final draft RTS further specifying the liquidity requirements of the reserve of assets. The draft RTS set specific minimum percentages of the reserve of assets according to daily and weekly maturities. They also establish the minimum amount of deposits in each official currency referenced. Furthermore, they envisage overall techniques of liquidity management to seek minimum creditworthiness, liquidity soundness and minimum diversification of bank deposits counterparties in the reserve of assets as well as to ensure minimum overcollateralisation to seek correlation between the reserve of assets and the assets referenced.
• Final draft RTS to specify the highly liquid financial instruments. These draft RTS set the highest quality liquid assets in the liquidity coverage ratio (LCR) as eligible highly liquid financial instruments. At the same time, and in order to seek for correlation between the highly liquid financial instruments and the assets referenced, in the case of ARTs referencing assets other than official currencies, financial instruments tracking the value of the assets referenced by the token or derivatives relating to them, are deemed eligible as highly liquid financial instruments. Furthermore, the draft RTS set concentration limits of highly liquid financial instruments by issuer.
• Final draft RTS to specify the minimum content of the liquidity management policy and procedures. These draft RTS envisage procedures for identifying, measuring and managing liquidity risk, a contingency policy and mitigation tools as well as minimum aspects of liquidity stress testing.
• Guidelines on recovery plans specifying the format and the content of the recovery plan that issuers need to develop and maintain. Considering the feedback received during the consultation period, the Guidelines further specify the content of the communication and disclosure plan. A number of targeted amendments were also made to streamline the wording and provide further clarity, inter alia by adding new definitions and by introducing a new paragraph to clarify that any provision regarding certain requirements applicable to the reserve of assets (e.g. certain recovery plan indicators and scenarios) does not apply to issuers of EMTs that are not subject to hold a reserve of assets in accordance with MiCAR.

Legal basis and next steps

The draft RTS relating to own funds have been developed in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), in accordance with Article 35(6) and Article 45(7)(c) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR), and specify the procedure and timeframe for own funds adjustments.

The draft RTS on liquidity have been developed, in close cooperation with ESMA and the ECB, to further specify the liquidity requirements of the reserve of assets, to specify the highly liquid financial instruments in the reserve of assets and to specify the minimum content of the liquidity management policy and procedures, in accordance with Articles 36(4), 38(5) and 45(7)(b) of MiCAR respectively.

The Guidelines on recovery plans have been developed in accordance with  Article 46(6) of MiCAR after consultation with ESMA. The Guidelines specify the format of the recovery plan and the information to be provided therein.