European Central Banks Push to Widen Stablecoin Yield Ban

The European Central Bank and the European Union’s national central banks have urged Brussels to tighten stablecoin rules, asking lawmakers to keep the ban on stablecoin interest and extend it to the crypto lending and staking services that mimic it. In a response to the European Commission’s consultation on the MiCA review published September 22, the European System of Central Banks (ESCB) said the payment of stablecoin remuneration “should continue to be prohibited,” and that attempts to circumvent the ban “through, for example, tri-party schemes must be addressed.”

Closing the interest loopholes

The ban should not stop at services covered by MiCA itself, the response argues, but should “apply also to unregulated services, such as crypto borrowing, lending and staking.” Some crypto platforms already engage in those activities, the central banks note, “thereby replicating the economic effect of interest payments through ancillary or unregulated services.” “Staking, lending and borrowing of crypto-assets should be regulated at Union level,” the response states, proposing a framework that separates agency services, investment services and banking-type activities. Stablecoin issuers are already pushing into those products, including Circle’s bitcoin-backed USDC borrowing.