Europe could tighten rules on stablecoins. In its response to the European consultation, the European System of Central Banks defends an expanded ban on returns linked to tokens. The ECB targets indirect mechanisms linked to lending, borrowing or staking. The objective is to preserve the distinction between electronic money and deposits, while the revision of MiCA opens debates on the rules of the European market. The proposal also directly concerns platforms offering returns.
In brief
- The ECB wants to extend the ban on returns on stablecoins to indirect mechanisms.
- Lending, borrowing and staking could be affected by these new restrictions.
- The ESCB also proposes to review European rules on stablecoin reserves.
- Central banks favor reserves that are quickly convertible into cash.
The ECB wants to close the door to indirect returns
The European System of Central Banks (ESCB) firstly supports maintaining the ban on remuneration paid directly to stablecoins. In his answer Following the consultation of the European Commission on the revision of the Regulation on markets in crypto-assets (MiCA), the ESCB nevertheless considers that this rule must go further. MiCA should cover certain activities that can produce a return without presenting it as a direct interest.
The ECB cites in particular crypto-asset lending, borrowing and staking services. According to European central banks, these mechanisms can transform a stablecoin into an income-generating instrument. A platform could therefore offer indirect remuneration while circumventing the ban applicable to direct payments. The ESCB therefore calls for regulation to prevent these structures.
This position is based on a question of competition in the financial system. Central bankers believe these yields could blur the line between electronic money and deposits. They then fear a difference in treatment between banking players and crypto platforms. With this logic in mind, MiCA should clearly separate a payment token from a revenue-generating product.
A ban extended to activities that are currently less covered
The ESCB wants the ban to go beyond the services already regulated by MiCA. It also requires activities such as lending, borrowing and staking to be taken into account when used to produce a return on stablecoins. This approach would expand the scope of the rule. It targets arrangements that circumvent the ban on direct remuneration.
The ECB considers that stablecoins can be integrated into multi-tiered structures. The token then retains its apparent payment function, while another service generates a financial return for its holder. For central banks, this organization may weaken the effect of the current rule. The review of MiCA should therefore examine these mechanisms such as direct remuneration.
The European debate joins an American discussion on rewards linked to stablecoins. Eight American banking groups have request senators to strengthen the restrictions provided for in the Clarity Act. They believed that returns comparable to interest could compete with deposits. The text was rejected in a procedural vote, with 49 votes to 50, where other provisions also counted.
Central banks also want to review reserves
The MiCA review is not just about returns. The ESCB also proposes to remove the obligation requiring issuers of stablecoins to keep part of the reserves in bank deposits. Today, this share reaches at least 30% for the stablecoins concerned. It rises to 60% for stablecoins considered important.
Central banks put forward another mechanism based on available liquidity. Issuers should hold specific portions of their reserves maturing within one to five business days. The change would shift the focus to converting assets into cash. The ESCB believes that this approach could limit the risks of rapid withdrawals.
The project is based on the thresholds of the European Banking Authority standards. For large stablecoins, these rules provide for 40% of reserves within one day and 60% within five business days. For smaller stablecoins, the thresholds reach 20% and 30%. The ECB views these levels as a starting point for liquidity requirements.
What happens next will now depend on the revision of the European MiCA framework. The ESCB calls for a ban covering direct and indirect forms of remuneration, as well as a new approach to reserves. MiCA could therefore evolve on two fronts: yield mechanisms and liquidity management. The ECB thus places the question of stablecoins at the heart of discussions on the balance between crypto innovation, payments and financial stability.
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