Are Stablecoins About To Become More Stable? (Is That Even Allowed?)

TL;DR

• The EBA just announced a public consultation bringing up issues around stablecoin liquidity.

• They’re worried that at any given second there could be a bank run, and in such a case, the folks issuing the stablecoins wouldn’t be liquid enough to stay afloat.

• The EBA is suggesting that stablecoin issuers (and some similar issuers) will have to have their own funds equal to 3% of their reserves.

• And – these issuers will have to undergo liquidity stress-tests to help better identify who needs some regulator babysitting, and who is more stable (pun intended).

Full Story

Do y’all understand stablecoins?

The idea is that you can purchase a stablecoin and it acts like a fiat currency.

“Can you use that in a sentence” – You

“Sure” – Us

For example: the USDC is a stablecoin pegged to the US dollar.

So 1 USDC = 1 US Dollar

It’s pretty neat – but!

The European Bank Association (EBA) is saying “hold up fellas, we see an issue.”

Here’s the deal:

The EBA just announced a public consultation bringing up issues around stablecoin liquidity.

They’re worried that at any given second there could be a bank run, and in such a case, the folks issuing the stablecoins wouldn’t be liquid enough to stay afloat.

The EBA is suggesting that stablecoin issuers (and some similar issuers) will have to have their own funds equal to 3% of their reserves.

This is up from the usual 2%.

AND!

These issuers will have to undergo liquidity stress-tests to help better identify who needs some regulator babysitting, and who is more stable (pun intended).

This could start as soon as June 2024.

Although there is still a ton to navigate, it’s a start for potentially safer stablecoin investments.