ECB pushes to close stablecoin yield loophole covering lending and staking
DeFi & Yields ·
European central banks want MiCA rules extended to ban indirect returns on stablecoins generated through crypto lending, borrowing and staking, not just direct remuneration.
The European Central Bank and the EU's national central banks have asked the European Commission to broaden the existing prohibition on stablecoin remuneration as part of a review of the Markets in Crypto-Assets regulation, according to a report. In a 57-page response to the Commission's MiCA consultation, the European System of Central Banks said it continues to support barring crypto-asset service providers from paying remuneration on stablecoins, and argued that ban should extend beyond activities already regulated under MiCA, which began taking effect in June 2024, to cover unregulated products including lending, borrowing and staking.
The central banks' core concern is that stablecoins can be turned into yield-bearing instruments through layered structures even when direct interest payments are prohibited, effectively sidestepping the rule's intent. The ESCB said electronic money is meant for payments rather than saving, and that indirect yield mechanisms blur the line between electronic money and bank deposits while distorting competition across the EU financial system. The group called strengthening the prohibition, covering both direct and indirect remuneration, a clear legislative priority.
Alongside the yield restriction, the central banks proposed dropping MiCA's current requirement that issuers hold 30% to 60% of stablecoin reserves as deposits at credit institutions, with the higher threshold applying to stablecoins designated as significant. In its place, they want liquidity-based rules requiring issuers to hold specified portions of reserves in assets maturing within one to five working days, shifting emphasis from where reserves sit to how fast they can be converted to cash. The banks said the deposit mandate could expose lenders to sudden withdrawal risk during a run.
The push mirrors a similar fight in the United States, where eight banking groups urged senators to tighten the Clarity Act's restrictions on stablecoin rewards on grounds that crypto platforms could otherwise offer deposit-like interest. That bill failed a 49-50 procedural vote, with ethics provisions also a factor.
What remains unresolved is whether the European Commission will adopt either proposal in its MiCA review, and how crypto platforms operating lending and staking products for stablecoin holders would need to restructure if the expanded ban takes effect.