EBA Opens Consultation on Liquidity Stress Test Guidelines for Crypto Assets

The European Banking Authority (EBA) released a consultation paper dated 08 November 2023, outlining proposed guidelines for liquidity stress testing of asset reference tokens as mandated by the newly instituted Regulation (EU) 2023/1114. This document, identified as EBA/CP/2023/27, sets forth the framework for common reference parameters for these stress tests, reflecting the regulatory focus on the stability and resilience of the crypto market.

The consultation seeks feedback on several key areas, with the EBA inviting comments particularly on the specific questions summarized in section 5.2 of the paper. Stakeholders are encouraged to respond with evidence-backed viewpoints, ensuring their responses are clear, rational, and directly related to the queries posed.

The deadline for submitting comments has been set for 08 February 2024, indicating a comprehensive review period. This timeline suggests the EBA's commitment to a thorough consultative process with industry players, aiming for robust regulatory practices.

In tandem with the call for feedback, the EBA has underscored the importance of data protection, adhering to Regulation (EU) 1725/2018, which safeguards individual data amidst the processing by the EBA. This is a critical assurance for stakeholders concerned with the confidentiality of their responses.

The EBA has made provisions for responses to be kept 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, ensuring a transparent and fair process.

The draft guidelines come in response to Article 45(4) of Regulation (EU) 2023/1114, requiring issuers of significant asset-referenced tokens to conduct regular liquidity stress tests. This regulation 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.

As the crypto asset landscape continues to evolve, the EBA's proposed guidelines mark a proactive step towards establishing 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.