In an article written for Eurofi, Jose Manuel Campa wrote that the upcoming European Union regulations to govern stablecoins would focus on making sure issuers had diverse reserves, managed conflicts of interest, and didn’t transfer risks to other participants.

MiCA (Markets in Crypto Assets) rules of the bloc are due to come into effect in 2019. However, crypto market participants should begin adjusting their operations immediately, according to Campa. His agency, which will play a major role in the implementation of MiCA through the drafting of more detailed laws, is responsible for drafting these details. The European Union passed MiCA last week.

MiCA requires stablecoin issuers to have sufficient reserves to handle turbulence. “The EBA will pay special attention to the diversification of deposit component of reserve,” Campa wrote.

Campa stressed the importance of stablecoin issuesrs minimizing conflicts of interest and mapping their connections to custodians, trading platforms and other crypto-related entities, in order to prevent risks from ricocheting within the ecosystem.

Campa stated that although the law, which licenses wallet providers and exchanges is not yet officially enshrined in the statutes, “the contours of MiCA” are familiar by now and I encourage market participants to adjust their operations to ensure sound risk-management, Campa said.

The collapse of the algorithmic stablecoin TerraUSD in 2013 prompted regulators and policymakers to examine how they can regulate cryptocurrencies pegged to U.S. dollars or other stable assets.

The collapse of FTX in November and the subsequent revelations about its murky relationships with Alameda Research (an affiliated trading firm) also brought attention to the risks that large crypto conglomerates pose.

Martin Moloney, secretary-general of the International Organization of Securities Commissions (IOSC), wrote in a piece for Eurofi that “the corporate structures and business models as well as exposures to the crypto market are not transparent.” Moloney, who is the secretary-general of International Organization of Securities Commissions (IOSC), is set to release a Consultation on Crypto Standards later this year.

Moloney said that the risk is “exacerbated” by the apparent market concentration of three major trading platforms.

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Sandali Handagama & Mark Nacinovich edited the book.