The european union's pankingwatchdog set out proposals on Wednesday requiring that fromJune issuers of stablecoins backed by currencies to have sufficient funds to fully redeeminvestors.

The bloc is deploying the world's first comprehensive set of rules for cryptocurrency andstablecoin markets, and the European Banking Authority (EBA) proposed minimum capital andliquidity requirements for issuers of stablecoins and other types of digitised tokens.

The EBA launched public consultations on liquidity requirements for the reserve of assets thatback a stablecoin, meaning that only eligible assets of high enough quality can be used.

The aim is to ensure that the assets can be quickly sold to raise cash for paying redemptionseven in stressed markets, key to stopping runs and contagion in a crisis.

The EBA said that issuers of stablecoins backed by a currency must be able to offer fulredemptions at par to investors.

Stablecoins backed by an asset such as gold, would only have to offer redemptions at thegoing market price for the asset at the time of redemption.

"Following application of the guidelines, the supervisor may strengthen the liquidityrequirements of the relevant issuer to cover those risks based on the outcome of the liquiditystress testing" EBA said in a statement.

Banks may be exempt from liquidity requirements in some instances, given that they alreadyhold liquidity buffers under existing EU bank capita and liquidity rules, the EBA said。

The proposed liquidity rules ensure that issuers of stablecoins, which can be non-bankinstitutions, meet the same safeguards, and also avoid unfair capital or liquidity advantagesover banks.

All the proposals have been put out to public consultation for three months, with a publichearing on Jan. 30.

Earlier this week, Britain's financial requlators set out initial proposals for requlating stablecoinsin the first leg of Uk rules for the crypto sector.

(Source: Reuters)