The European Central Bank and the European Union's national central banks want crypto platforms prevented from offering lending, borrowing, staking, and other products that generate indirect returns on stablecoins.
The central banks said yield-bearing stablecoins could blur the distinction between electronic money and bank deposits, circumvent existing restrictions, and distort competition in the EU's financial system. The European System of Central Banks stated in a 57-page response to the European Commission's consultation on the Markets in Crypto-Assets regulation that it "continues to support the prohibition on crypto-asset service providers paying remuneration on stablecoins."
Expanding Beyond Current Rules
The ESCB said the ban should not be limited to services already governed by MiCA, which began taking effect in June 2024, but should also cover unregulated activities including crypto lending, borrowing, and staking. The central banks warned that allowing indirect returns could enable stablecoins to be "transformed into yield-bearing arrangements through lending, staking or other layered structures," potentially circumventing the prohibition on direct remuneration.
Reserve Requirement Changes
The central banks also proposed replacing MiCA's requirement that stablecoin issuers hold 30% to 60% of reserves as bank deposits with liquidity rules based on how quickly reserve assets can be converted into cash. The ESCB argued that minimum deposit requirements could expose lenders to sudden withdrawals during a run, and said stablecoin issuers should instead hold specified portions of reserves maturing within 1-5 working days.
The proposal would shift focus from where stablecoin reserves are held to how quickly they can be turned into cash. Draft European Banking Authority standards suggest significant stablecoins hold at least 40% of reserves in assets maturing within one day and 60% within five working days, with lower thresholds for non-significant stablecoins.
