European central banks seek broader ban on stablecoin yield activities

The European Central Bank (ECB) and national central banks of the European Union have called for an expansion of the existing prohibition on remuneration for stablecoins. They want crypto platforms barred from offering lending, borrowing, staking or any other products that generate indirect returns on stablecoin holdings.

Rationale behind the proposal

The banks argue that yield‑bearing stablecoins can blur the distinction between electronic money, which is intended for payments, and bank deposits, which are a form of saving. Allowing indirect returns, they say, could undermine competition and create a level‑playing‑field issue across the EU financial system.

Proposed regulatory changes

• Extend the ban on remuneration to cover both direct and indirect forms of yield on stablecoins, including activities not currently regulated by MiCA such as crypto‑lending, borrowing and staking.
• Replace the current requirement that stablecoin issuers keep 30%–60% of reserves in bank deposits with liquidity rules based on how quickly reserve assets can be converted into cash (e.g., 1–5 working days).
• Adopt thresholds similar to draft European Banking Authority standards: for significant stablecoins, at least 40% of reserves must mature within one day and 60% within five days; for non‑significant stablecoins, the thresholds would be 20% and 30% respectively.

Context and comparison

The ESCB’s position mirrors discussions in other jurisdictions, such as the United States, where banking groups have urged tighter restrictions on stablecoin rewards to prevent competition with bank deposits. While the U.S. “Clarity Act” failed to pass, the European proposal seeks to pre‑empt similar concerns by codifying the ban in legislation.

Implications for the market

If adopted, the measures would limit crypto‑asset service providers (CASPs) from offering yield‑generating products tied to stablecoins, potentially reshaping the landscape of crypto‑based financial services in the EU.