EU Stablecoin Debate Heats Up Ahead of MiCA Review

As the European Union's review of its Markets in Crypto-Assets regulation, or MiCA, gains pace, a growing number of stakeholders are calling for looser rules on stablecoin rewards. Stand With Crypto EU, a crypto advocacy group, has led the charge, arguing that current restrictions put stablecoins at a disadvantage compared to traditional bank deposits and e-money products. The group claims that MiCA should permit not only interest payments, but also cashback, loyalty points, and fee discounts to boost the competitiveness of euro-denominated stablecoins.

According to Stand With Crypto EU, more than 50,000 people have participated in a European Commission public consultation on the MiCA review, while a separate petition calling for looser stablecoin rules has gathered over 126,000 signatures. The group's secretary-general, Harry Pearce Gould, emphasized the need for compliant stablecoins to offer rewards to holders, citing the U.S. as a model for promoting stablecoins as a payments layer for tokenized finance.

However, the European System of Central Banks (ESCB) and the European Central Bank (ECB) have pushed back against the idea of easing stablecoin rules. In comments submitted for the MiCA review, the ESCB proposed expanding the interest ban to cover lending, borrowing, staking, and other yield-generating activities. The ESCB also argued that liquidity standards should apply to stablecoin issuers, rather than requiring them to hold part of their reserves as bank deposits.

Christine Lagarde, president of the ECB, has previously warned about the potential impact of stablecoin adoption on banks, suggesting that a shift of bank deposits into stablecoins could weaken banks' lending function and the transmission of monetary policy.