The aim of the new liquidity guidelines is to ensure that the stablecoin can be quickly redeemed even during turmoil market conditions to avoid the risk of any bank runs and contagion in a crisis situation.

Under the proposed liquidity guidelines, stablecoin issuers must offer any stablecoin backed by a currency that is fully redeemable at par to investors. The official proposal by EBA noted that the stablecoin liquidity guidelines will act as a liquidity stress test for stablecoin issuers.

EBA believes the stress test will highlight any shortcomings and lack of liquidity for the stablecoin, which can help EBA to only approve fully backed stablecoins with enough liquidity buffer.

“The… Read more on Cointelegraph