Research Summary
The report discusses the Markets in Crypto-Asset Regulation (MiCA) passed by the EU in June 2023, which introduces a supervisory and regulatory regime for “significant stablecoins”. The report compares MiCA’s regime with other frameworks such as the Basel Committee on Banking Supervision (BCBS) framework and the European Central Bank (ECB) oversight framework, highlighting potential misalignments and proposing adjustments.
Key Takeaways
MiCA’s Dual-Purpose Approach
- Unique Feature of MiCA: The report highlights that MiCA’s regime is unique in its dual-purpose approach. It not only transfers supervisory responsibility but also applies additional prudential measures. This feature is not found in any other framework analyzed in the report.
Transfer of Supervisory Responsibility
- Alignment with SSM and PISA: The transfer of supervisory responsibility to the European Banking Authority (EBA) under MiCA is broadly aligned with the EU Single Supervisory Mechanism (SSM) framework and the ECB’s oversight framework for electronic Payment Instruments, Schemes and Arrangements (PISA), which also trigger EU supervision.
Misalignment with BCBS G-SIB Model
- Significance Criteria Discrepancy: MiCA’s significance criteria seem misaligned with the BCBS G-SIB model, which is similarly aimed at capturing systemic risks and introducing increased prudential requirements. For instance, MiCA’s market capitalisation threshold is €5 billion, while the smallest G-SIB, Standard Chartered, has a total value of assets of £682 billion.
Questioning the Calibration of MiCA’s Significance Thresholds
- Insufficient Representation of Systemic Risk: The report suggests that while MiCA’s significance thresholds may warrant the transfer of supervisory responsibility to the EBA, they do not appropriately represent systemic risk at the financial stability level that would warrant the substantial increase of prudential requirements similar to that of G-SIBs.
Proposed Disentanglement of MiCA’s Dual Purpose
- Recommendation for MiCA: The report proposes that the dual purpose of MiCA’s significance regime should be disentangled, implying a need for separate mechanisms for the transfer of supervisory responsibility and the application of additional prudential measures.
Actionable Insights
- Re-evaluation of MiCA’s Significance Thresholds: Regulatory bodies and stakeholders should consider re-evaluating the calibration of MiCA’s significance thresholds to ensure they appropriately represent systemic risk at the financial stability level.
- Consideration of Separate Mechanisms: There may be a need to consider separate mechanisms for the transfer of supervisory responsibility and the application of additional prudential measures under MiCA’s regime.
- Further Comparison with Other Frameworks: Additional research and comparison with other regulatory frameworks could provide further insights into the effectiveness and appropriateness of MiCA’s regime for significant stablecoins.
