ECB stablecoin regulation would extend yield ban to lending and staking

The European Central Bank wants to close a loophole that could let stablecoin holders earn a return without technically breaking the rules. Together with national central banks across the European Union, the ECB has asked lawmakers to extend the bloc’s existing ban on stablecoin interest payments to cover lending, borrowing, staking and other arrangements that quietly generate yield for token holders. The push, laid out in a detailed response to the European Commission’s review of the Markets in Crypto Assets framework, marks one of the clearest signals yet of how far ECB stablecoin regulation could reach if regulators get their way.

Key takeaways

• The ECB and national EU central banks want MiCA’s ban on stablecoin remuneration expanded to cover lending, borrowing, staking and similar yield-generating products.
• The European System of Central Banks argues electronic money should be used for payments, not treated as a savings or investment product.
• Regulators are also proposing to scrap the current rule requiring issuers to hold 30% (or 60% for significant tokens) of reserves as bank deposits.
• In its place, they want liquidity-based rules requiring reserve assets to mature within one to five working days.
• The proposal echoes a parallel fight in the United States, where banking groups and Citigroup CEO Jane Fraser have pushed to tighten stablecoin reward rules under the CLARITY Act.

ECB and EU Central Banks Push to Expand Stablecoin Yield Ban

The core message from the European System of Central Banks, or ESCB, is simple: stablecoins should stay stablecoins, not turn into disguised savings accounts. “Electronic money is intended to be used for making payments and not as a means of saving,” the group wrote in its 57-page response to the European Commission’s consultation on reviewing MiCA.

Extension of Ban to Lending, Borrowing, and Staking

Under current MiCA rules, issuers of electronic money tokens and crypto asset service providers are already barred from paying interest directly on stablecoins. But the ESCB warns that this ban is easy to sidestep. Stablecoins can be “transformed into yield-bearing arrangements through lending, staking or other layered structures,” the central banks said, meaning a holder could still pocket a return even if the coin itself never pays a cent of interest. The group said it “continues to support the prohibition on CASPs paying remuneration on stablecoins,” and wants that restriction explicitly written to cover both direct payments and indirect returns generated through other financial products built around the token.

Rationale Behind Yield Restrictions

Why does this matter beyond a technical rulebook? Because the line between a payment token and a bank deposit is exactly what MiCA was built to protect. The ESCB warned that letting stablecoins generate indirect yield “could weaken the regulatory distinction between electronic money and bank deposits,” while also creating an uneven playing field between crypto platforms and regulated banks that face far stricter capital and deposit rules. As the central banks put it, “maintaining and, where necessary, strengthening the prohibition, covering both direct and indirect forms of remuneration, should be a clear legislative priority.”

Proposed Changes to MiCA Stablecoin Reserve Requirements

Beyond the yield ban, the ESCB is also asking Brussels to rethink how stablecoin reserves are structured, arguing that today’s fixed deposit rule could itself become a source of banking-sector stress.

Removal of Fixed Minimum Bank Deposit Reserve Rules

Right now, MiCA requires issuers of tokens pegged to official currencies to keep at least 30% of the referenced amount as deposits with credit institutions, rising to 60% for tokens classified as significant. The central banks want that fixed threshold scrapped entirely. Their concern: a large stablecoin issuer effectively becomes a major, and potentially unstable, funding source for whichever bank is holding those deposits. If redemptions spike and the issuer needs to pull a large deposit out fast, the receiving bank could face sudden funding pressure at precisely the moment the issuer is scrambling for cash.

Introduction of Liquidity-Based Reserve Asset Maturities

In place of the fixed deposit percentage, the ESCB has proposed a liquidity-based framework, requiring issuers to hold set portions of reserves in assets with maturities ranging from one to five working days. The idea is to give issuers a pool of assets that can be converted to cash quickly during a redemption wave, without leaning so heavily on withdrawing bank deposits. This isn’t an entirely new concept for MiCA. Existing rules already require reserve assets to be segregated and managed in a way that addresses liquidity and redemption risks, with the European Banking Authority, working alongside the European Securities and Markets Authority and the European Central Bank, tasked with specifying liquidity requirements tied to daily and weekly maturities. The ESCB’s proposal would keep that liquidity-based logic in place while dropping the separate rule forcing a minimum share of reserves into bank deposits.

Broader Regulatory and Market Context

None of this is happening in a vacuum. A strikingly similar fight has been playing out on the other side of the Atlantic, though for a different reason tied to the same underlying worry: stablecoins pulling money away from the traditional banking system.

Similar US Regulatory Efforts and Banking Industry Concerns

In the United States, eight banking associations pushed lawmakers in September to tighten the CLARITY Act‘s restrictions on stablecoin incentives, arguing that rewards tied to balances or holding periods could function like deposit interest even with another condition attached. Earlier, in July, the American Bankers Association, the Independent Community Bankers of America and 76 state banking associations sought tighter limits on incentives that might nudge customers toward holding stablecoins instead of keeping cash in bank accounts. Citigroup CEO Jane Fraser voiced a related concern in August, warning that stablecoin reward programs could shrink the deposit base available for lending, even while she backed passage of the CLARITY Act overall. That legislation ultimately failed to advance in a 50-to-49 procedural vote on September 15, with stablecoin rewards among the sticking points debated alongside ethics-related provisions.

Implications for Crypto Platforms and Traditional Banks

The EU and US arguments approach the same tension from opposite directions. American banks worry about reward-paying stablecoins siphoning deposits away from lenders. The ESCB, by contrast, is worried about the risk created when stablecoin issuers themselves park enormous deposits inside banks, then need to yank that money out fast during a run. Taken together, the two debates suggest that regulators on both sides of the Atlantic see the same underlying fault line: stablecoins sitting at the edge of the banking system, capable of moving large sums quickly enough to strain the institutions holding their reserves. For crypto platforms operating in the EU, tighter crypto lending restrictions and a broadened remuneration ban would mean rethinking any product that indirectly rewards stablecoin holders, even if the token itself stays interest-free. For banks, revised stablecoin reserve rules built around liquidity buckets rather than fixed deposit shares could reduce their exposure to sudden, large-scale withdrawals tied to a single issuer’s redemption cycle.

FAQ

What does the ECB want regarding the stablecoin remuneration ban?

The ECB and national central banks want the MiCA remuneration ban on stablecoins extended to cover lending, borrowing, staking, and other yield-generating arrangements.

Why does the ESCB say stablecoins should not generate yield?

The ESCB stated that electronic money is intended for payments, not as a means of saving or generating yield, to preserve its distinction from bank deposits.

What changes does the ESCB propose to stablecoin reserve requirements under MiCA?

The ESCB proposes removing fixed minimum bank deposit requirements of 30% or 60% and instead requiring liquidity-based reserve asset maturities of one to five working days.

How do current MiCA rules address stablecoin reserve management?

MiCA requires reserve assets to be segregated and managed to cover liquidity and redemption risks, with prudential requirements for significant tokens.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.