European Central Bank Proposes Expanded Ban on Stablecoin Yields

The European Central Bank (ECB) is moving to expand its prohibition on yields from stablecoins, aiming to cover lending and staking activities. This initiative, supported by the central banks of EU member states, seeks to prevent crypto platforms from offering indirect yields through various financial products. The European System of Central Banks (ESCB) emphasized that electronic money should primarily serve payment purposes rather than act as a savings vehicle, reinforcing its stance against crypto asset service providers (CASP) paying rewards for stablecoins.

In its response to the European Commission's consultation on the Markets in Crypto-Assets Regulation (MiCA), the ESCB argued that allowing indirect yields could blur the distinctions between electronic money and traditional bank deposits, potentially disrupting the competitive landscape of the EU financial system. The ESCB has identified maintaining and strengthening this ban as a legislative priority, advocating for it to encompass both direct and indirect forms of rewards.

Additionally, the central banks proposed changes to the MiCA requirements for stablecoin issuers regarding reserve holdings. Currently, stablecoin issuers must maintain a portion of their reserves in bank deposits, with requirements varying based on the classification of the stablecoin. The ESCB suggested replacing this with liquidity rules that would require significant stablecoins to allocate a minimum of 40% of their reserves to assets maturing within one day, and 60% to those maturing within five working days, while non-significant stablecoins would have lower thresholds.

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Source: KLEA News