The European Central Bank and the EU’s national central banks asked the European Commission to extend MiCA’s ban on paying interest on stablecoins to crypto lending, borrowing and staking, the products that currently deliver that yield outside the regulation’s reach.
In a 57-page response submitted to the European Commission’s targeted consultation on the MiCA review, the European System of Central Banks wrote that the prohibition “should not be limited to cases where CASPs offer services governed by MiCAR, but should apply also to unregulated services, such as crypto borrowing, lending and staking.” CASPs are crypto-asset service providers, the licensed intermediaries MiCA already covers.
MiCA bars stablecoin issuers and those licensed intermediaries from paying holders interest. The central banks’ complaint is that the yield reaches holders anyway. Decentralized finance protocols show how stablecoins can be “transformed into yield-bearing arrangements through lending, staking or other layered structures,” the response said, sidestepping the direct ban. It named loyalty program benefits and “liquidity mining incentives embedded in DeFi arrangements” as indirect payments that should be caught, along with rewards, fee reductions and bundled services.
Reaching the Products First
A wider ban only works if MiCA covers those products, and the central banks asked for that as well. “Staking, lending and borrowing of crypto-assets should be regulated at Union level,” the response said, arguing the arrangements should be classified on their economic substance rather than on the technology behind them. Where a customer hands control of assets to a firm that promises to return the same quantity later, perhaps with a bit more, the ESCB said the arrangement starts to look like taking repayable funds and may belong under EU banking law.
The legal footing is that these tokens are electronic money, and “electronic money is intended to be used for making payments and not as a means of saving,” the response said.
Loosening the Reserve Rule
On reserves, the central banks want a rule relaxed. MiCA obliges issuers to hold at least 30% of reserve assets as bank deposits, rising to 60% for tokens designated significant. The ESCB asked for those floors to be dropped and replaced with requirements on how quickly reserves can be converted to cash, starting from draft European Banking Authority standards under which significant stablecoins would need 40% of their reserves in assets that mature within a single working day, and 60% within five. The thresholds for other tokens would be 20% and 30%.
The consultation closes Sept. 30, with the Commission’s review report, which may carry a legislative proposal, due by mid-2027.
Related Listen: Why an Ethereum Proposal to Zero Out Staking Yield Sparked a Revolt
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