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Key Takeaways
- The ECB and EU central banks want to broaden the stablecoin yield ban to cover lending, borrowing and staking, not just direct remuneration
- They also propose replacing MiCA’s fixed bank-deposit reserve requirement with a liquidity-tiered structure based on how fast assets can be converted to cash
- The push echoes the U.S. Clarity Act fight, where banking groups raised similar concerns before the bill failed a Senate procedural vote
The European Central Bank and the European Union’s national central banks are pushing to bar crypto platforms from offering lending, borrowing, staking or other products that generate indirect returns on stablecoin holdings.
The push, submitted as part of a formal review of EU crypto rules, would extend an existing ban on direct stablecoin remuneration to cover activities the current rules do not explicitly address.
Central Banks Argue Yield Blurs a Key Distinction
The European System of Central Banks, in a 57-page response to the European Commission’s consultation on reviewing the Markets in Crypto-Assets regulation, said electronic money is meant to be used for payments rather than as a savings vehicle. They argued that indirect yield structures risk eroding that distinction.
The group said it continues to support the existing prohibition on crypto-asset service providers paying remuneration on stablecoins, and argued that the ban should not remain limited to activities already regulated under MiCA, which began taking effect in June 2024.
Instead, the central banks said the prohibition should extend to currently unregulated activities, including crypto lending, borrowing and staking, describing a strengthened and broadened ban covering both direct and indirect remuneration as a legislative priority.
A Transatlantic Echo of the Clarity Act Fight
The European push mirrors a dispute that sat at the center of the U.S. debate over the Clarity Act. Eight U.S. banking industry groups had urged senators to tighten the bill’s restrictions on stablecoin rewards, arguing that crypto platforms could otherwise offer interest-like returns that compete directly with bank deposits.
The Clarity Act ultimately failed a 49-50 Senate procedural vote earlier this month, a defeat in which ethics provisions also played a significant role alongside the stablecoin yield dispute.
The European central banks specifically flagged the risk that stablecoins could be converted into yield-bearing products through lending, staking or other layered financial structures, potentially circumventing the existing prohibition on direct remuneration even without technically violating it. EU rules should be designed to close that gap, the group argued.
That concern reflects a broader pattern regulators globally have grappled with as stablecoin use has grown: rules written to prohibit a specific mechanism can be circumvented if market participants route the same economic outcome through a different structure that the rule did not anticipate.
The central banks’ proposal treats the underlying substance, an investor earning a return on a stablecoin holding, as the relevant regulatory trigger, regardless of which specific product or contractual arrangement produces that return.
A Separate Push to Change Reserve Requirements
Beyond the yield restrictions, the central banks proposed removing MiCA’s requirement that stablecoin issuers hold a portion of their reserves as deposits at banks, arguing the rule could expose lenders to sudden, large-scale withdrawals during a period of financial stress.
Under current MiCA rules, stablecoin issuers must hold at least 30% of reserves as bank deposits, a threshold that rises to 60% for stablecoins designated as significant under the regulation.
In place of that fixed deposit requirement, the central banks proposed rules requiring issuers to hold specified portions of reserves in assets maturing within one to five working days, shifting the regulatory focus from where reserves are held to how quickly they can be converted into cash.
The banks argued that large stablecoin-linked deposits can become an unstable funding source for banks, leaving lenders exposed if an issuer needs to withdraw funds rapidly to meet a wave of redemptions.
Liquidity-Tiered Reserve Requirements Replace Fixed Deposit Rules
The central banks pointed to draft European Banking Authority liquidity standards as a starting point for the new approach.
Those draft standards would require issuers of significant stablecoins to hold at least 40% of reserves in assets maturing within one day and 60% within five working days, with lower thresholds of 20% and 30% proposed for non-significant stablecoins.
The shift from a fixed deposit-based requirement to a liquidity-tiered structure reflects a broader regulatory concern that has surfaced in stablecoin oversight debates on both sides of the Atlantic: that large, concentrated reserve holdings at individual banks can themselves become a systemic vulnerability if an issuer needs to move funds quickly.
By tying reserve rules to how fast assets can be converted to cash rather than to which type of institution holds them, the European central banks are aiming to preserve issuers’ ability to meet redemption demands without relying on the health of any single banking relationship.
