ECB Pushes Broader Ban on Stablecoin Rewards

The European Central Bank and EU national central banks are pushing for stricter regulations on stablecoin rewards. They argue that electronic money should primarily function as a payment instrument rather than a savings product.

The current Markets in Crypto-Assets regulation (MiCA) prohibits crypto-asset service providers from paying remuneration on stablecoins, but the ESCB wants to expand this restriction to cover indirect yield mechanisms such as lending and staking.

The central banks believe that allowing these products could blur the distinction between electronic money and traditional bank deposits, creating competitive imbalances within the EU financial system. They argue that large stablecoin deposits could become an unstable funding source for banks if issuers suddenly withdraw money to satisfy customer redemptions.

The ESCB also proposed changing MiCA's stablecoin reserve requirements, shifting focus from asset composition to liquidity and the ability of assets to be converted into cash quickly. They cite draft European Banking Authority standards that would require significant stablecoins to hold at least 40% of reserves in assets maturing within one day and 60% within five working days.