Consultation on RTS to specify the highly liquid financial instruments in the reserve of assets under MiCAR

The European Banking Authority (EBA) today launched three consultations on draft Regulatory Technical Standards (RTS) to specify the liquidity requirements of the reserve of assets, the highly liquid financial instruments in the reserve of assets and the minimum content of the liquidity management policy and procedures of relevant issuers of tokens. Furthermore, the EBA consulted on draft Guidelines to establish the common reference parameters of the stress test scenarios to be included in their liquidity stress testing. These consultations form part of the prudential package of MiCAR deliverables and make up the third batch of MiCAR policy products. The consultations run until 8 February 2024.

In the RTS on liquidity requirements of the reserve of assets the EBA proposes minimum percentage rates of the reserve of assets with a maturity of no longer than between 1 and 5 working days. Furthermore, the EBA proposes overall techniques for liquidity management of the reserve of assets. This includes minimum creditworthiness and liquidity soundness of credit institutions taking deposits from issuers, concentration limits to issuers’ deposits with a credit institution and overcollateralisation of the assets referenced by the tokens. Moreover, the draft RTS establish the specific minimum amount of deposits with credit institutions to be held by issuers in each official currency referenced.

In the RTS on highly liquid financial instruments in the reserve of assets, the EBA specifies financial instruments that can be considered highly liquid and bearing minimal market risk, credit risk and concentration risk, where the reserve of assets may be invested in. In developing these RTS, the EBA is required to take into account the various types of assets that can be referenced by an asset-referenced token and their correlation with the highly liquid financial instruments that the issuer might invest in. This is to mitigate different market value volatilities between them. In turn, this ensures that the amount of the reserve of assets can meet, at all times, the market value of the asset referenced for any redemption request that can arise. Furthermore, in the specification of highly liquid financial instruments, the EBA needs to consider the Liquidity Coverage Ratio (LCR) framework and the Undertakings for the Collective Investment in Transferable Securities (UCITs) framework. This latter framework serves to determine the concentration limits in the investment of highly liquid financial instruments by the issuer, which is also part of the mandate to the EBA.

The EBA proposes draft RTS specifying the liquidity management policy and procedures. These ensure that the relevant issuers of tokens properly assess and monitor their liquidity needs and that their reserve assets have a resilient liquidity profile to meet any redemption of the asset-referenced tokens that can be requested at any time by their holders.

The draft EBA Guidelines on liquidity stress testing, lay out the risks identified by the EBA to be covered in the liquidity stress testing. They also pinpoint the methodology identifying the common reference parameters of the stress test scenarios to be included in the liquidity stress testing to be applied. Following application of the Guidelines, the supervisor may strengthen the liquidity requirements of the relevant issuer to cover those risks based on the outcome of the liquidity stress testing.

Consultation process

Comments to the consultation paper can be sent by clicking on the "send your comments" button on the EBA's consultation page. The deadline for the submission of comments is 8 February 2024.

These consultation papers form part of the prudential package of MiCAR products, for which the EBA will hold a hybrid public hearing on 30 January from 10:00 to 16:00 CET. The EBA invites interested stakeholders to register using this link by 23 January 2024 at 16:00 CET. The dial-in details will be communicated to those who have registered to virtually attend the meeting.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis

The EBA has developed, in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), draft RTSs to further specify the liquidity requirements of the reserve of assets, to specify the highly liquid financial instruments in the reserve of assets and to specify the minimum content of the liquidity content of the liquidity management policy and procedures, in accordance with Articles 36(4), 38(5) and 45(7)(b) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR), respectively. Furthermore, the EBA has developed, in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), draft GL to establish the common reference parameters of the stress test scenarios to be included in the liquidity stress testing, following Article 45(8) of MiCAR.

Background

MiCAR establishes a regime for the regulation and supervision of crypto-asset issuance and crypto-asset service provision in the European Union (EU). It came into force on 29 June 2023, and the provisions relating to ARTs will be applicable from 30 June 2024.

Among the activities within the scope of MiCAR are the activities of offering to the public or seeking admission to trading of ARTs and EMTs and issuing such tokens. Supervision tasks are conferred on the EBA for ARTs and EMTs that are determined by the EBA to be significant. Additionally, the EBA is mandated to develop 17 technical standards and guidelines under MiCAR to further specify the requirements for ARTs and EMTs, and an additional 3 mandates jointly with ESMA (and, in one case, also with EIOPA).