EU Stablecoin Interest Ban Differs From Germany’s €256 Income Tax Threshold

The European Union prohibits interest tied to holding covered stablecoins, while Germany applies a separate tax threshold to some private crypto-lending income, a distinction that matters for U.S. readers comparing yield offers.

Under the Markets in Crypto-Assets regulation (MiCA), issuers and crypto-asset service providers cannot grant interest connected to e-money tokens or asset-referenced tokens. An e-money token seeks a stable value by reference to one official currency. An asset-referenced token seeks a stable value by reference to another value or right, or a combination of them, including one or more official currencies.

The prohibition extends beyond payments labeled as interest. Discounts and other benefits tied to how long a customer holds a covered token can count, including benefits delivered through third parties. A product’s “earn” or “lending” label alone does not establish whether its terms comply with MiCA.

Lending can create a different source of return when a holder makes crypto-assets available to a borrower in exchange for compensation. That possibility does not mean every stablecoin lending offer is permitted under MiCA. Its terms still matter, including whether a benefit is tied to holding the token.

The European Banking Authority (EBA), the EU’s banking regulator, has recommended that the European Commission consider rules for crypto-asset lending, including lending through intermediaries and access to decentralized finance lending. The EBA identified risks involving misleading disclosures, excessive leverage, contagion, hacks and fraud. Its recommendation has not established new lending rules.

Germany’s income tax treatment addresses the income a lender receives. German guidance places returns from lending privately held crypto-assets under Section 22(3) of the Income Tax Act. The exemption applies only when a taxpayer’s total qualifying income in that category, which can include income besides private crypto lending, is less than €256 in a calendar year.

At €256 or more, that exemption does not apply; the threshold is not a €256 deduction. Crypto-assets received as compensation for lending are valued at their market price when received. Returns from lending crypto-assets held as business assets are classified as business income instead.

The €256 threshold is a German tax rule, not a U.S. tax threshold or permission to pay interest on covered stablecoins. The European Commission is due to submit its MiCA review report by June 30, 2027.