EBA and ESMA Release Consultation Paper on Assessing Suitability for Crypto-Asset Service Providers

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published a joint consultation paper on two draft guidelines.

On October 19, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published joint guidelines that include granting authorization for asset-referenced tokens (ARTs) and crypto-asset service providers (CASPs) issuance and conducting prudential assessments for potential acquisitions.

The draft guidelines pertain to the evaluation of the fitness and suitability of individuals serving on the management team, as well as the suitability of shareholders and individuals with significant holdings in companies that issue ARTs and CASPs, while also establishing standardized criteria for assessing their knowledge, skills, experience, integrity, and commitment to their roles.

The guidelines stated in these draft documents have the purpose of providing clear and consistent criteria for assessing the suitability of management members, shareholders, and those with significant stakes in these entities. By doing so, they seek to reduce the likelihood of any differences in rule application and potential rule exploitation.

Notably, the draft guidelines are being issued in accordance with the Markets in Crypto-Assets Regulation (MiCA), which establishes a comprehensive regulatory framework for crypto-assets in the European Union and is expected to enter into force in 2024.

The goal of these consultation guidelines is to reduce the possibility of inconsistencies in rule application and regulatory arbitrage. This assessment helps maintain transparency and reliability within the industry.

It’s important to note that the consultation period for these guidelines will remain open until January 22, 2024. This is to allow for feedback and input from stakeholders before EBA and ESMA consider all comments received and finalize the guidelines.

EU Banking Watchdog Encourages Stablecoin Responsibility Ahead of MiCA Implementation

In July, ahead of anticipated mandatory regulations set for the following year, the European Union’s banking watchdog urged stablecoin issuers to voluntarily adhere to specific “guiding principles” related to risk management and consumer protection.

The EBA also introduced its initial set of measures for public feedback, with the aim of clarifying the provisions of the MiCA. These measures contain clauses such as a perpetual right of redemption and guidelines for managing complaints. The action also ensures that the best practices and enhanced stability and security are established in the stablecoin sector.

During that period, the EBA promised that they would release a second set of draft guidelines in October to address the capital needs of stablecoin issuers and how businesses should handle stablecoin redemptions in volatile markets.

EBA and ESMA are currently seeking input and feedback on the two draft guidelines during a three-month consultation period. It is anticipated that the final versions of these guidelines will be released at a time when the Markets in Crypto Assets (MiCA) regulation comes into effect.