Response to consultation on RTS to specify the highly liquid financial instruments in the reserve of assets under MiCAR
Question 1. Do respondents have any comment on the list of eligible highly liquid financial instruments provided under point (c) of Article 1(1) of these draft RTS?
We respectfully request the EBA to review the restrictions it has proposed to narrow the eligibility of highly liquid financial instruments from those listed in the delegated regulation on the liquidity coverage requirement (LCR), to ensure they achieve the overall intended policy outcomes. While the EBA has used this as the basis for the definition of the eligible highly liquid financial instruments in the issuer’s reserve assets, the additional restrictions, and specificities it has applied do not appear to be commensurate with the overall policy outcomes. Furthermore, these may unintentionally force issuers to invest reserve assets in riskier assets. For instance, the EBA has sought to reduce the scope of highly liquid financial instruments to consider the expected higher volatility of the assets referenced by the tokens, when they are not referenced to official currencies. This would appear to suggest that all such assets will behave in a similar manner and does not consider situations where greater correlation of assets referenced by the token reduces expected volatility and therefore reduces the potential mismatch in market and credit risk between the assets referenced and the reserve of assets.
Question 2. Do respondents have any comment on the general and operational requirements to be met by highly liquid financial instruments provided under points (a) and (b) of Article 1(1) of these draft RTS? Please explain if some criteria is expected to be challenging to be met in practice.
NA
Question 3. Do respondents find the treatment for hedging derivatives under Article 2 clear to be applied?
NA
Question 4. Do respondents think that the draft RTS create any impediment for issuers to ensure a good control of the correlation between the highly liquid financial instruments and the assets referenced? This is particularly relevant for the case of tokens referenced to assets other than official currencies.
NA
Question 5. Do respondents have any concern about the feasibility for issuers to have the minimum amount of reserve of assets considering the list of eligible highly liquid financial instruments, the one-to-one currency matching requirement in Regulation (EU) 2023/1114 and the concentration limits under Article 3 of these draft RTS? This is particularly relevant for tokens referenced to official currencies.
NA
Question 6. Do respondents have any concern about the operational feasibility of the look through approach envisaged in paragraph 3 of Article 3 of these draft RTS? If yes, please elaborate your answer and specify the reasons for the concerns.
NA
Question 7. Do respondents have any comment with regards to the unwind mechanism proposed under Article 4 of these draft RTS and the related examples provided?
NA
Question 8. Do respondents have any general comment about the interaction of these draft RTS with the business model and the continuity of the business of these activities?
NA
Question 9. Do respondents find any provision in these draft RTS confusing or difficult to understand?
NA
Question 10. Do respondent have any comment on the impact assessment provided?
NA