MiCA — or Markets in Crypto Assets — technical standards were published by the European Banking Authority (EBA) on Thursday. Ahead of an upcoming July deadline, the EBA has published a detailed set of guidelines around technical standards that Web3 companies operating in the region will soon have to adhere to. The aim is to ensure that the EU’s Web3 sector is safe, both financially and technically. The European Union (EU) became one of the first regions in the world to regulate the crypto and Web3 sectors last year with its MiCA regulation.
In January 2023, the EU had indicated that it could take up to 18 months for the EBA to produce guidance on technical standards for the MiCA regulation. This task has now been completed ahead of the estimated deadline.
MiCA regulation published by the EBA: what’s new?
The EBA has addressed a number of issues in its final draft technical standards for MiCA, including issues related to liquidity requirements, stress testing programmes, asset reserves and recovery plans, the EBA wrote in its official announcement.
Regulatory oversight of asset-referenced tokens (ARTs) and e-money tokens (EMTs) are also part of the EBA guidelines. While ARTs maintain a stable value by being pegged to other assets or fiat currencies, EMTs are digital representations of traditional fiat currencies. CBDCs (central bank digital currencies) are part of the EMT category of crypto-assets.
“These standards specify the criteria for assessing a higher degree of risk and a minimum set of requirements for the design and implementation of their stress testing programmes,” the EBA said on Thursday. It also set out the procedure for authorities to determine the 25 working day timeline for token issuers to raise and manage their own funds, thereby eliminating risks for the holders of their tokens.
Token issuers within the EU have also been ordered to adjust their own funds to three percent of the average reserve of their significant assets. Furthermore, the EBA has determined that crypto assets backed by real estate or commodities can be seen as very valuable liquidity tools.
The EBA has worked with the European Securities and Markets Authority (ESMA) to develop these guidelines, which further expand the MiCA Regulation.
Both organizations agreed that recovery plans for Web3 companies need to be well-streamlined to protect the EU investor base, after major crypto projects like FTX and Terra collapsed in 2022, leaving the sector in trouble.
“These provide for procedures for identifying, measuring and managing liquidity risks, a contingency policy and mitigation tools, as well as minimum aspects of liquidity stress testing. In light of the feedback received during the consultation period, the guidelines further specify the content of the communication and disclosure plan,” the EBA said in its announcement.
About the EU MiCA regulation
The Markets in Crypto Assets (MiCA) framework was approved by the EU in October 2022 by the European Parliament’s Committee on Economic and Monetary Affairs (ECON). The legislation entered into force in June 2023.
The aim of this legislation is to ensure consumer protection, prevent market manipulation and curb financial crime related to digital assets in the EU.
“MiCA has been pivotal in establishing a harmonized regulatory standard for crypto assets, issuers and service providers, with a focus on consumer protection, transparency and market integrity,” said the European Blockchain Observatory and Forum (EUBOF), which praised the MiCA regulation in May this year.
