The European Banking Authority (EBA) Proposed Guidelines for Stablecoin Issuers
The European Union’s banking watchdog, the European Banking Authority (EBA), has proposed a new set of guidelines for stablecoin issuers that will set minimum capital and liquidity requirements. The aim of these liquidity guidelines is to ensure the stablecoin can be quickly redeemed even during turbulent market conditions, thus avoiding the risk of bank runs and contagion in a crypto crisis.
The proposed liquidity guidelines state that stablecoin issuers must offer any stablecoin backed by a currency that is fully redeemable at par to investors. The official proposal by the EBA noted that the stablecoin liquidity guidelines will act as a liquidity stress test for stablecoin issuers, highlighting any shortcomings and lack of liquidity for the stablecoin, which can help the authority to only approve fully-backed stablecoins with enough of a liquidity buffer.
The EBA believes the stress test will be beneficial in the current crypto market, where crypto currency in Nigeria, crypto stock market, and crypto UK banks are all competing for investors. The advantages and disadvantages of web 3.0 and advantages of web 3.0 must also be taken into account when considering the latest crypto currency and crypto bank options.
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