ECB Pushes Broader Ban on Stablecoin Rewards Under MiCA

The European Central Bank and EU national central banks are calling for tighter restrictions on stablecoin rewards, including returns generated through crypto lending, borrowing and staking.

In a response to the European Commission’s review of the Markets in Crypto-Assets regulation (MiCA), the European System of Central Banks (ESCB) argued that electronic money should primarily function as a payment instrument rather than a savings product.

The ESCB said it continues to support MiCA’s prohibition on crypto-asset service providers paying remuneration on stablecoins. However, it wants the restriction expanded beyond activities directly regulated under MiCA to cover indirect yield mechanisms, including lending, staking and other arrangements that could generate returns for stablecoin holders.

According to the central banks, allowing these products could blur the distinction between electronic money and traditional bank deposits while creating competitive imbalances within the EU financial system. Stablecoins could effectively become yield-bearing products through layered structures even when issuers do not directly pay interest.

The debate resembles recent disputes in the United States, where banking groups pushed lawmakers to strengthen restrictions on stablecoin rewards during consideration of the Clarity Act. The legislation later failed in a 49-50 Senate procedural vote.

The ESCB also proposed changing MiCA’s stablecoin reserve requirements. Current rules require issuers to keep at least 30% of reserves as deposits with credit institutions, rising to 60% for stablecoins classified as significant.

Instead, European central banks want regulators to focus on reserve liquidity and how quickly assets can be converted into cash. They argued that large stablecoin deposits could become an unstable funding source for banks if issuers suddenly withdraw money to satisfy customer redemptions.

The ESCB pointed to draft European Banking Authority standards that would require significant stablecoins to hold at least 40% of reserves in assets maturing within one day and 60% within five working days. Proposed thresholds for non-significant stablecoins are 20% and 30%, respectively.