Stablecoins in MiCAR and the role of the European Banking Authority

Abstract

When we think about the word “crypto” the association with something uncertain comes naturally. This is prevalently true for most consumers and companies that do not belong to the financial sector. However, with their dynamic nature, crypto assets represent a challenge even for financial market players and especially regulators. The outstanding spread in last years of crypto currencies, tokenized “products”, blockchain technologies and the recent failures related to the crypto world represented a wake-up call for all world regulators. The Market in Crypto-Assets Regulation (MICAR) is the attempt of the European Commission to face and reduce the uncertainty of crypto assets. One of the most relevant contribution of this Regulation regards the discipline on stablecoins, which represent the core of the crypto sector. Will MiCAR be enough to prevent crises and ensure the financial stability of the market? We still can’t say. For sure, the role of supervisors will be essential in this respect. According to MICAR, the vigilance tasks in the EU will be carried out by the European Banking Authority together with National Competent Authorities, designing a supervisory model that strongly resembles the Single Supervisory Mechanism. One of the most interesting aspects of this framework regards the role of the EBA which will have a totally new level of powers and responsibilities.

The first aim of this thesis is to enlighten what are the risks related to the crypto world. About that, we will illustrate some recent failures which involve crypto assets. This will be very useful to understand why regulation on crypto assets is essential but difficult at the same time. Subsequently, we will provide some examples of current national legislations on crypto-assets and how they will eventually fit with the upcoming MICAR (which will be effective in 2024). After the first 2 introductory chapters, the focus will be on the core of the crypto sector: stablecoins. We will discuss how they are regulated in MiCAR, underlining some of the provisions to face their risks. Subsequently, we will illustrate the MiCAR supervisory framework, describing the tasks of all supervisory authorities involved and underlining the common elements with the Single Supervisory Mechanism. From this, the discussion will go on with one of the main topics: the role of EBA. We will illustrate its new powers and responsibilities, pointing out how important the collaboration between the EBA, other authorities and supervised entities will be. Ultimately, we will discuss the significance parameters for stablecoins in MiCAR, trying to understand whether they are really able to capture entities posing risk on financial stability.