European Central Banks Push to Expand Stablecoin Yield Ban to Crypto Lending and Staking
The ECB's proposal to broaden stablecoin yield restrictions
The European Central Bank (ECB) and the European Union's national central banks want to prevent crypto platforms from offering lending, borrowing, staking, and other products that generate indirect returns on stablecoin holdings. The group, known as the European System of Central Banks (ESCB), laid out its position in a 57-page response to the European Commission's consultation on reviewing the Markets in Crypto-Assets (MiCA) regulation, which began taking effect in June 2024.
The ESCB said it "continues to support the prohibition on CASPs paying remuneration on stablecoins," referring to crypto-asset service providers. It argued that the ban should extend beyond services already governed by MiCA to also cover unregulated activities like crypto lending, borrowing, and staking.
Key points from the ESCB response
- Electronic money is intended for payments, not saving, the ESCB stated.
- Indirect yields on stablecoins could blur the distinction between electronic money and bank deposits.
- The prohibition on stablecoin remuneration should cover both direct and indirect forms, the ESCB said.
- Stablecoins can be "transformed into yield-bearing arrangements through lending, staking or other layered structures," potentially circumventing existing rules.
Proposed changes to stablecoin reserve requirements
The ESCB also proposed replacing MiCA's requirement that stablecoin issuers hold part of their reserves as bank deposits with new liquidity rules based on how quickly reserve assets can be converted into cash. Under current MiCA rules, issuers must hold at least 30% of reserves as deposits at credit institutions. That requirement rises to 60% for stablecoins designated as significant under the regulation.
The central banks argued that the existing deposit rule could expose lenders to sudden withdrawals during a run. They proposed that issuers instead hold specified portions of reserves maturing within one to five working days.
The ESCB pointed to draft standards from the European Banking Authority as a starting point. Those standards would 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%.
The debate mirrors a U.S. dispute
The ESCB's position echoes a controversy at the center of the U.S. Clarity Act debate. Eight U.S. banking groups urged senators to tighten the bill's restrictions on stablecoin rewards, claiming that crypto platforms could offer interest-like returns that compete with bank deposits. The Clarity Act ultimately failed a 49-50 procedural vote, with ethics provisions also playing a role.
What is confirmed and what is still unclear
What is confirmed is that the ESCB has formally submitted its 57-page response to the European Commission and laid out specific proposals regarding both yield restrictions and reserve requirements. The central banks' position is clear: they want the prohibition on stablecoin remuneration broadened to cover indirect forms through lending, borrowing, and staking.
What is still unclear is whether the European Commission will adopt these proposals and how the final revision of MiCA will be shaped. The source does not specify a timeline for the consultation's conclusion or any legislative action on the ESCB's recommendations.
Why this matters for the crypto sector
If the ESCB's proposals are adopted, crypto platforms operating in the EU would face tighter restrictions on how stablecoin holdings can generate returns for users. The shift from fixed bank deposit requirements to liquidity-based reserve rules would also change how stablecoin issuers manage their backing assets. The ESCB argued these changes would protect the level playing field across the EU financial system and reduce risks tied to large stablecoin deposits becoming an unstable source of bank funding.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.