European Banking Authority Seeks Feedback on Liquidity Stress Testing for Asset Reference Tokens

The European Banking Authority (EBA) has released a consultation paper on November 8, 2023, to introduce proposed guidelines for liquidity stress testing of asset reference tokens in compliance with the newly enacted Regulation (EU) 2023/1114. This paper, known as EBA/CP/2023/27, presents a framework for common reference parameters for these stress tests, aligning with the regulatory focus on the stability and resilience of the crypto market.

Seeking Feedback on Key Areas

The consultation paper calls for feedback on several crucial areas and invites stakeholders to provide evidence-backed viewpoints, specifically on the questions summarized in section 5.2 of the document. The EBA encourages clear, rational, and directly related responses to ensure a comprehensive and informative feedback process.

Deadline for Comments

Stakeholders have until February 8, 2024, to submit their comments, indicating a lengthy review period that demonstrates the EBA’s commitment to engaging with industry players for robust regulatory practices and standards.

Emphasis on Data Protection

In addition to the feedback request, the EBA has highlighted the importance of data protection, adhering to Regulation (EU) 1725/2018, to safeguard individual data during processing. This assurance is critical for stakeholders concerned with the confidentiality of their responses.

Confidentiality of Responses

The EBA has made provisions for responses to stay confidential upon request, in line with its public access to documents policy. Any decision to not disclose certain responses will be open to review by the EBA’s Board of Appeal and the European Ombudsman to ensure transparency and fairness.

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Scope of Regulatory Oversight

The draft guidelines are a response to Article 45(4) of Regulation (EU) 2023/1114, which mandates issuers of significant asset-referenced tokens to conduct regular liquidity stress tests. This regulation also extends to electronic money institutions issuing e-money tokens that are considered significant under Article 58(1), point (a), of the same regulation. Competent authorities of member states may also require these tests from issuers that are not deemed significant, emphasizing a broad scope of regulatory oversight.

Proactive Step in the Crypto Asset Landscape

As the crypto asset landscape evolves, the EBA’s proposed guidelines signify a proactive measure to establish a more secure and resilient financial ecosystem. The finalized guidelines, post-consultation, are expected to shape the conduct of liquidity stress tests, ensuring that issuers of crypto assets are prepared for adverse market conditions.

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