Europe’s Central Banks Want Stablecoin Yield Ban to Cover Workarounds

A stablecoin balance that earns a return through lending or staking may look different from a deposit, but Europe’s central banks argue the economic effect can be much the same. They want the European Union to close those routes, extending an existing restriction on stablecoin interest as part of a review of its crypto rulebook.

In a response published Sept. 22, the European System of Central Banks said the prohibition on paying stablecoin remuneration should remain in place and reach beyond services covered by the Markets in Crypto-Assets Regulation, or MiCA. The ECB and EU national central banks specifically pointed to crypto borrowing, lending and staking, as well as indirect incentives such as loyalty benefits. Their concern: platforms can offer returns that resemble interest even if the stablecoin issuer itself pays nothing.

MiCA already bars issuers and crypto-asset service providers from paying interest on e-money tokens. The central banks say that is not enough if platforms can route around the restriction through other products. Their policy argument is that electronic money should serve payments, not function as a savings vehicle. Yield-bearing products, they warn, could blur the line between stablecoins and bank deposits, putting pressure on banks’ funding base.

That debate matters for large dollar-pegged tokens including Tether’s USDT and Circle’s USDC. Circle, whose shares trade as CRCL, is among the issuers whose products would face a tougher regulatory environment if Brussels adopts the recommendation. The response does not itself change the rules, however. It is an input to the European Commission’s MiCA review, and the consultation remains open until Sept. 30.

The recommendation also lands amid a similar argument in the United States over whether crypto platforms should be allowed to offer stablecoin rewards. Europe’s proposal takes a broader line: regulators should look at how a product works, not only whether an issuer labels a payment as interest. For exchanges and token issuers, the practical question is whether customer rewards, lending products or staking offers could be recast as prohibited remuneration. Any change would require further EU action, leaving the current rules in force for now.