EU Unveils Capital Requirements for Stablecoin Issuers

The European Union’s banking watchdog has introduced
rules for the regulation of cryptocurrency and stablecoin markets. The European
Banking Authority (EBA) has proposed minimum capital and liquidity requirements
for issuers of stablecoins and other digitized tokens.

The EBA’s proposal, published today (Wednesday), is
designed to ensure that issuers of stablecoins backed by currencies have
sufficient funds for investors to redeem in case of losses. This move aims to
establish a framework for the stablecoin industry and provide safeguards
against potential crises.

Key to the proposed regulations is the requirement
for issuers to maintain liquidity
Liquidity

The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent

The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
Read this Term for the reserve of assets that back the
stablecoin reserves. These assets must meet specific criteria, ensuring their
quality, and only eligible assets of high enough quality can be utilized.