The EBA consults on draft regulatory technical standards on liquidity requirements and on draft Guidelines on liquidity stress testing of relevant issuers of tokens, under MiCAR

EBA launched four consultations on three draft RTS and one set of draft Guidelines as part of the prudential package for MiCA. The consultations cover liquidity requirements of the reserve of assets, highly liquid financial instruments, and the minimum content of liquidity management policy and procedures for relevant issuers of tokens. Additionally, EBA is seeking input on stress test scenarios for liquidity stress testing.
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In the draft RTS on highly liquid financial instruments with minimal market risk, credit risk and concentration risk (EBA/CP/2023/24), EBA proposes minimum percentage rates for the reserve of assets with different maturities and outlines techniques for liquidity management. They include criteria for creditworthiness, concentration limits, and overcollateralization of assets referenced by tokens.
The draft RTS are aimed at precisely defining highly liquid financial instruments, aligning with Article 38(5) of MiCA and addressing market, credit, and concentration risks. Notably, issuers of asset-referenced tokens, including electronic money institutions issuing e-money tokens, are mandated to invest proceeds in such instruments. Collaborating with ESMA and the ECB, the EBA focuses on liquidity risks tied to the stable value of asset-referenced and e-money tokens, examining factors like redemption requests, DLT infrastructure, and reserve asset custody.
The Draft RTS outline concentration limits and an unwinding mechanism for collateral swaps, repos, and reverse repos concerning reserve assets. In addition, EBA discusses time horizons for unwinding and adjustments based on securities financing transaction nature. Concentration limits for UCITS are proposed, including a 35% cap for government bonds and a 10% limit for covered bonds.
Interested stakeholders can contribute until 8 February 2024, and a public hearing is scheduled for 30 January 2024.
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The draft RTS on the specifying liquidity requirements of the reserve of assets (EBA/CP/2023/25) focus on criteria for highly liquid financial instruments with minimal market, credit, and concentration risk.
These draft RTS, developed under Article 36(4) of MiCA, aim to specify liquidity requirements for issuers of asset-referenced tokens. MiCA mandates these issuers to establish and maintain a reserve of assets, ensuring timely payment to token holders upon redemption. The proposed RTS address the maturity of reserve assets, establishing percentages with varying timeframes and extending its applicability to electronic money institutions issuing e-money tokens.
The EBA’s mandate includes considerations such as the size, complexity, and nature of the reserve and the token, along with concentration limits and regulatory frameworks. Additionally, the proposed standards define specific minimum deposit amounts in official currencies, differentiating between significant and non-significant tokens. The consultation paper emphasizes the crucial role of effective liquidity management in ensuring stability and timely redemption of asset-referenced tokens, considering diverse risk factors and market dynamics.
Interested stakeholders can contribute until 8 February 2024, and a public hearing is scheduled for 30 January 2024.
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The draft RTS on specifying the minimum contents of the liquidity management policy and procedures (EBA/CP/2023/26) aim to ensure issuers properly assess and monitor their liquidity needs, maintaining a resilient liquidity profile to meet token redemption requests.
These draft RTS outline the minimum criteria for liquidity management policies and procedures as stipulated in Article 45(7)(b) MiCA. Issuers of significant ARTs and e-money institutions issuing substantial EMTs are required to establish and uphold these policies to guarantee a resilient liquidity profile for their reserve assets. The principal aim is to enable these issuers to function normally, even during instances of liquidity stress. Developed in collaboration with ESMA, these draft RTS aim to define the essential components of such policies and procedures. It is noteworthy that these requirements also apply to non-significant ARTs and EMTs if directed by the competent authority.
Article 45(7)(b) of MiCA specifically mandates that the reserve of assets for significant asset-referenced tokens comprises at least 60% of deposits referenced in each official currency. EBA underscores the significance of prudent management to mitigate adverse market impacts and the negative repercussions of substantial redemptions, ultimately upholding confidence in the token’s stability as a payment mechanism. EBA advocates for a comprehensive approach, ensuring alignment with forthcoming guidelines on liquidity stress testing, governance arrangements, and recovery plans for issuers of ARTs.
Interested stakeholders can contribute until 8 February 2024, and a public hearing is scheduled for 30 January 2024.
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Finally, EBA also introduced draft Guidelines on establishing the common reference parameters of the stress test scenarios for the liquidity stress tests (EBA/CP/2023/27), identifying risks and outlining methodology for common reference parameters in stress test scenarios.
The draft guidelines are in accordance with Article 45(4) MiCA, which mandates regular liquidity stress testing for issuers of significant assets referenced tokens and e-money institutions issuing significant e-money tokens. The requirement may also apply to non-significant issuers if mandated by the competent authority.
The draft guidelines aim to assist in managing the reserve of assets and liquidity risk, allowing supervisory authorities to potentially enhance liquidity requirements based on stress test outcomes. The document outlines the development process, considering related regulations and draft RTS in parallel.
The identification of risks include redemption risk, risk related to deposits with credit institutions, market risk and volatility, and de-pegging risk. The liquidity stress testing methodology involves assessing parameters to determine and calibrate stress scenarios and weights for the reserve of assets and assets referenced by tokens. The comparison of weighted market values under stress helps evaluate the reserve’s capacity to meet redemption requests.
Interested stakeholders can contribute until 8 February 2024, and a public hearing is scheduled for 30 January 2024.
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MiCA, in effect since 29 June 2023, regulates crypto-asset issuance and services in the EU. The consultations aim to refine the regulatory framework, with the relevant provisions applicable from 30 June 2024. The EBA, in collaboration with ESMA and the ECB, developed these drafts to specify liquidity-related aspects of MiCA.