European central banks are advocating for stricter rules on stablecoin issuance and use, aiming to prevent indirect yield structures from blurring the distinction between electronic money and bank deposits. The European System of Central Banks (ESCB) has submitted a 57-page response to the European Commission’s review of the Markets in Crypto-Assets Regulation (MiCA), calling for a prohibition on any form of remuneration—direct or indirect—on stablecoins offered by crypto-asset service providers (CASPs). This stance would extend beyond MiCA’s existing scope, which took effect in June 2024, to cover unregulated activities such as lending, borrowing, and staking services that generate indirect returns on stablecoin holdings.
The ECB argues that stablecoins, designed primarily for payments, risk being repurposed as a savings alternative through layered financial products, thereby distorting competition in the EU’s financial system. The central banks propose replacing MiCA’s current reserve requirements—where issuers must hold 30% to 60% of reserves in bank deposits—with liquidity-based rules. Under these new proposals, stablecoin issuers would need to maintain reserves that can be converted into cash within 1 to 5 working days. For significant stablecoins, this would require at least 40% of reserves to mature within one day and 60% within five working days. Non-significant stablecoins would face thresholds of 20% and 30%, respectively. The ECB cites draft European Banking Authority standards as a reference point for these liquidity thresholds.
The proposal reflects broader concerns about the stability of stablecoin reserves. The ECB warns that large stablecoin deposits could become an unstable source of bank funding, exposing lenders to sudden withdrawal risks during redemption surges. By shifting the focus from deposit placement to liquidity maturity, the central banks aim to mitigate potential systemic risks while maintaining a clear separation between electronic money and traditional banking products.
The ECB’s stance echoes a parallel debate in the U.S., where eight major banking groups urged lawmakers to tighten restrictions on stablecoin rewards under the Clarity Act. Though the bill failed a procedural vote, the ECB’s push underscores the persistent tension between regulatory efforts to contain crypto innovation and the need to preserve financial stability.
This proposal marks a significant step in the EU’s regulatory approach to stablecoins, aiming to ensure that electronic money remains a tool for transactions rather than a substitute for traditional banking services.
