On September 22 local time, the European System of Central Banks (ESCB), comprising the European Central Bank and the national central banks of European Union member states, proposed extending the ban on interest paid on stablecoins to rewards delivered through lending and staking. The proposal appeared in its response to the European Commission's consultation on a review of the EU Markets in Crypto-Assets Regulation (MiCA). The response also proposed replacing requirements to hold stablecoin reserves in bank deposits with requirements for short-term liquidity.
MiCA currently prohibits stablecoin issuers and crypto-asset service providers from paying interest to holders. The ESCB said the ban should also apply to crypto-asset lending, borrowing, and staking, which currently fall outside MiCA's scope. This would cover arrangements that combine services or alter the form of rewards while producing an effect equivalent to interest payments. The response said decentralized-finance services could circumvent the ban by turning stablecoins into yield-bearing products through lending, staking, and similar activities.
For reserves, the ESCB proposed eliminating the minimum proportion that must be held as bank deposits and instead requiring issuers to hold specified proportions of assets maturing within one business day and five business days. It said concentrating reserves in bank deposits could allow mass stablecoin redemptions to transmit liquidity pressure to banks because issuers might withdraw deposits all at once to repay customers. The ESCB said the European Banking Authority's draft technical standards could serve as the starting point for the specific liquidity ratios, but that further analysis is needed.
The response is a non-binding policy proposal; no new prohibition or reserve requirement has taken effect. The Commission's consultation closes on September 30. After reviewing the feedback, the Commission will decide whether to submit amendments to MiCA.