ECB Seeks to Expand MiCA Ban on Stablecoin Interest Payments

The European Central Bank (ECB) and European System of Central Banks (ESCB) are pushing for an extension of the MiCA ban on paying interest on stablecoins to other activities like lending, borrowing, and staking. The current rule prohibits paying stablecoin holders interest, but the ECB and ESCB want to expand this to other forms of compensation, including rewards, fee reductions, and loyalty benefits.

In its response to the European Commission's MiCA consultation, the ESCB argued that paying people to hold a coin is equivalent to deposit accounts, which are subject to different rules. The ESCB also suggested that stablecoins issued in other jurisdictions should not be considered viable or acceptable in the EU.

However, not everyone agrees with the ECB and ESCB's position. Circle, a leading stablecoin issuer, argued that the regulator should focus on clearing more stablecoins as MiCA-compliant rather than expanding the ban. Aave Labs, a DeFi giant, also pushed back against the proposed expansion, arguing that lending returns are paid by borrowers who post collateral and are taken on by lenders, unlike paying people to hold a coin.

The Stand With Crypto EU advocacy group, which gathered over 50,000 signatures, is also opposed to the proposed expansion. The group argues that EU platforms will lose business if regulators move forward with the restrictive suggestions.