ECB Stablecoin Regulation Expands Yield Ban and Reserve Rules

The European Central Bank wants to close a loophole that could let stablecoin holders earn a return without technically breaking the rules. Together with national central banks across the European Union, the ECB has asked lawmakers to extend the bloc’s existing ban on stablecoin interest payments to cover lending, borrowing, staking and other arrangements that quietly generate yield for token holders. The push, laid out in a detailed response to the European Commission’s review of the Markets in Crypto Assets framework, marks one of the clearest signals yet of how far ECB stablecoin regulation could reach if regulators get their way.

Key takeaways

• The ECB and national EU central banks want MiCA’s ban on stablecoin remuneration expanded to cover lending, borrowing, staking and similar yield-generating products.
• The European System of Central Banks argues electronic money should be used for payments, not treated as a savings or investment product.
• Regulators are also proposing to scrap the current rule requiring issuers to hold 30% (or 60% for significant tokens) of reserves as bank deposits.
• In its place, they want liquidity-based rules requiring reserve assets to mature within one to five working days.
• The proposal echoes a parallel fight in the United States, where banking groups and Citigroup CEO Jane Fraser have pushed to tighten stablecoin reward rules under the CLARITY Act.