The European Central Bank (ECB) and the European Union's national central banks want crypto platforms to be prevented from using lending, borrowing, staking and other products that offer indirect returns on stablecoin holdings.
“Electronic money is intended to be used for making payments and not as a means of saving,” the European System of Central Banks (ESCB) said in a response to the European Commission’s consultation on reviewing the Markets in Crypto-Assets regulation (MiCA).
In the 57-page response, the group said it “continues to support the prohibition on CASPs paying remuneration on stablecoins,” referring to crypto-asset service providers. The ban, it said, should not be limited to services already governed by MiCA, which began taking effect in June 2024, and should also cover unregulated activities, including crypto lending, borrowing and staking.
The banks said that allowing indirect returns could undermine the distinction between electronic money and bank deposits, as well as distort the level playing field across the EU financial system.
“Maintaining and, where necessary, strengthening the prohibition, covering both direct and indirect forms of remuneration, should be a clear legislative priority,” the ESCB stated.
Their position echoes a dispute that was at the center of the debate over the Clarity Act in the U.S. Eight U.S. banking groups urged senators to tighten the bill’s restrictions on stablecoin rewards, claiming that crypto platforms could otherwise offer interest-like returns that compete with bank deposits. The Clarity Act failed a 49-50 procedural vote, in which ethics provisions also played an important role.
The ECB said stablecoins can be “transformed into yield-bearing arrangements through lending, staking or other layered structures,” potentially circumventing the prohibition on direct remuneration. EU rules should prevent that outcome, it said.
The central banks also proposed removing MiCA’s requirement that stablecoin issuers hold part of their reserves as bank deposits, arguing that the rule could expose lenders to sudden withdrawals during a run. Under current rules, stablecoin issuers must hold at least 30% of reserves as deposits at credit institutions. The requirement rises to 60% for stablecoins designated as significant under MiCA.
The ESCB said the minimum deposit requirement should be replaced with rules requiring stablecoin issuers to hold specified portions of reserves maturing in 1-5 working days.
The proposal would shift the focus from where stablecoin reserves are held to how quickly they can be turned into cash. The ESCB said large stablecoin deposits can become an unstable source of bank funding, leaving lenders exposed if an issuer needs to withdraw funds quickly to meet redemptions.
The central banks pointed to draft European Banking Authority standards as a starting point. Those standards require significant stablecoins to hold at least 40% of reserves in assets maturing within one day and 60% within five working days. For non-significant stablecoins, the suggested thresholds are 20% and 30%.