ECB Seeks Wider Stablecoin Yield Ban Amid Lending and Staking Concerns

The European Central Bank and national central banks across the European Union have called for an expansion of MiCA's stablecoin remuneration ban to cover lending, borrowing, staking, and other arrangements that can generate indirect returns for token holders.

The European System of Central Banks (ESCB) stated that indirect returns could allow platforms to turn stablecoins into yield-bearing arrangements despite existing restrictions under the Markets in Crypto Assets framework. The ESCB wants EU lawmakers to make clear that the restriction cannot be bypassed by placing stablecoins inside lending, borrowing, staking, or similar products.

The current MiCA rules prevent issuers of electronic money tokens and crypto asset service providers from granting interest in relation to those tokens. However, the ESCB argues that stablecoins can be transformed into yield-bearing arrangements through lending, staking, or other layered structures. This could provide holders with an economic return even when the stablecoin itself does not directly pay interest.

The ESCB proposed replacing MiCA's minimum bank deposit requirements with reserve rules based on one to five day liquidity. According to the proposal, significant stablecoins referencing official currencies would need at least 40% of reserve assets available within one working day and 60% within five working days.