European Citizens Push Back Against MiCA Ban on Stablecoin Interest and Rewards

TLDR

• A massive letter-writing campaign organized by Stand With Crypto EU delivered more than 50,000 messages to European regulators during the MiCA review period.
• The public consultation period ended on September 30, marking one of the largest crypto-related citizen responses in EU history.
• Existing MiCA regulations prohibit stablecoin providers from offering any form of interest, cashback programs, or loyalty incentives to users.
• The European System of Central Banks has submitted recommendations to expand these restrictions to include staking, lending, and borrowing services.
• A separate petition advocating for more accommodating EU stablecoin policy has attracted over 126,000 signatures.

Tens of thousands of European residents have contacted the European Commission in recent days. Their goal is to persuade policymakers to revise regulations that currently prevent stablecoin issuers from providing incentives to holders.

These communications formed part of an official public consultation regarding the Markets in Crypto-Assets Regulation, commonly referred to as MiCA. The consultation window closed at the end of September.

Stand With Crypto EU, a digital asset advocacy organization, coordinated the outreach effort. The organization made its findings public through a statement released Thursday.

Understanding The Existing Restrictions

MiCA’s current framework prohibits stablecoin providers from distributing interest payments to token holders. The same prohibition extends to alternative incentive structures such as cashback programs and reward schemes.

According to Stand With Crypto EU, this creates an uneven playing field. Traditional financial products like bank accounts and electronic money services can legally provide such benefits to their customers.

The advocacy group is urging the Commission to address this disparity during the MiCA revision process. Their proposal calls for licensed stablecoin providers to gain permission to offer cashback, reward programs, and fee discounts within a transparent regulatory framework.

Harry Pearce-Gould serves as general manager for Stand With Crypto EU. He characterized the overwhelming response as evidence of genuine grassroots interest.

“These are people who use stablecoins, understand what the rewards ban means for them, and want to be heard before the Commission decides what comes next for MiCA,” he said.

The initiative generated significantly more participation than previous EU cryptocurrency consultations. The letter count reached approximately six times the volume received during the European Central Bank’s 2021 digital euro consultation.

It also dramatically exceeded the 198 submissions the Commission collected during its initial 2020 consultation on digital asset regulations.

Banking Authorities Advocate For Expanded Restrictions

As cryptocurrency advocates campaign for regulatory flexibility, Europe’s central banking system is recommending the opposite approach.

The European System of Central Banks submitted its official feedback to the MiCA review on September 22. In their submission, the banking authorities requested that the Commission broaden the existing prohibition on stablecoin interest payments.

Their proposal would expand the ban to encompass cryptocurrency lending platforms, borrowing services, and staking mechanisms. These products can provide indirect yield opportunities for stablecoin holders that function similarly to traditional interest.

The central banks additionally expressed concerns regarding how stablecoin issuers maintain their reserve assets. They suggested replacing existing regulations—which mandate that issuers hold a specific percentage of reserves in bank deposits—with alternative liquidity standards.

The rationale behind this recommendation is that a rapid, large-scale redemption of stablecoins might compel issuers to withdraw deposits from financial institutions quickly. Such a scenario could destabilize the affected banks.

The European Central Bank has voiced similar warnings previously. Last June, it highlighted that stablecoins offer immediate transferability and trading capability, while the underlying reserve assets may require longer settlement periods.

ECB President Christine Lagarde addressed these concerns during remarks in May. She cautioned that capital flowing from traditional bank accounts into stablecoins could diminish the lending capacity of financial institutions.

In addition to the letter-writing initiative, Stand With Crypto EU reports that more than 126,000 individuals have added their names to a petition. This petition advocates for the EU to embrace a more permissive regulatory stance toward stablecoins in general.

The organization identifies multiple cryptocurrency and financial services companies as collaborating partners, including Boerse Stuttgart Digital and IOTA. Stand With Crypto was originally launched by Coinbase in 2023 and has subsequently expanded its operations into the United Kingdom and European markets.

The European Commission has not yet announced a timeline for releasing the findings from its MiCA review or introducing any regulatory amendments.