ECB Tells Brussels to Widen Stablecoin Interest Ban and Hand Frankfurt More Crypto Oversight

The European System of Central Banks, which groups the ECB with the central banks of all 27 EU member states, filed a formal response Tuesday to the European Commission's review of the Markets in Crypto-Assets Regulation, the bloc's crypto rulebook known as MiCA. The message: the rules aren't tight enough.

The centerpiece is stablecoins. MiCA already bars issuers from paying interest to holders. The ESCB wants that ban kept and expanded to cover the workarounds exchanges have found, according to Euronews. Some platforms offer crypto lending, borrowing, and staking that the ECB says function as disguised interest payments. The response calls closing that gap "a clear legislative priority," per Euronews, and wants the ban to reach loyalty-program rewards too.

That puts Brussels on a different track than Washington. The 2025 GENIUS Act bans US stablecoin issuers from paying interest but left exchanges free to offer rewards, a gap Congress is still fighting over in the pending Clarity Act, according to the Daily Signal. EJ Antoni, writing for the Daily Signal, argues the underlying problem isn't which side gets the loophole. He says regulators are sorting identical financial products by the technology used to build them rather than by what the product actually does, creating arbitrage that benefits industry insiders over community banks and ordinary depositors. Both the US and EU approaches have unresolved gaps.

On reserves, the ESCB wants a bigger structural change. Current MiCA rules force stablecoin issuers to hold 30% of reserves as bank deposits, rising to 60% for tokens classified as "significant," under Articles 54, 56, and 58 of the regulation, according to Crypto Times. The ESCB wants that scrapped in favor of a liquidity-bucket model: a set share of reserves must be convertible to cash within one to five business days, using instruments like overnight repos and short-term government bonds, according to BigGo Finance.

The ECB's reasoning, per BigGo Finance: deposits from e-money institutions carry a 100% outflow assumption in bank liquidity calculations. A fast-growing stablecoin could force tens of billions of euros into bank deposits that banks then have to treat as if they could vanish overnight. The euro stablecoin market is still small, around €450 million according to BigGo Finance, but the ESCB is arguing preemptively before growth makes the current rule a systemic problem.

The response also asks for new powers to restrict tokens pegged to non-euro currencies if they threaten eurozone financial stability, and for EU-level supervision of the largest crypto firms rather than leaving oversight fragmented across national regulators, according to Crypto Briefing. The ESCB flagged what it called "material challenges" in enforcement, saying firms not fully compliant with MiCA can still reach EU customers.

None of this is binding. The European Commission's consultation closes September 30, and EU diplomats told Euronews they expect a formal revision of MiCA in 2027, which would still need approval from the European Parliament and member states. Whether Brussels adopts the central banks' recommendations, waters them down, or shelves them is an open question.

The ECB pushed its Pontes system, which settles tokenized bonds, commercial paper, and deposits directly in central bank money, into production on September 21, according to Weex. The bank also opened applications this month for merchants to join a digital euro pilot ahead of a possible 2029 issuance, with 36 payment firms including Deutsche Bank, UniCredit, and Stripe already selected in July, according to KuCoin and Weex. A third, less-publicized project called Appia is designing the target architecture for a unified tokenized-asset market by 2028.

Isadora Arredondo of Hedera told CoinDesk, as cited by KuCoin, that the digital euro's real test isn't public messaging but commercial adoption. Merchants need incentives to accept it, and consumers need friction-free ways to spend it. The ECB frames the digital euro as a defense against dollar-backed stablecoins like Tether's USDT and Circle's USDC eroding European monetary autonomy.

The strongest pushback on the interest ban comes from crypto advocates who argue restricting stablecoin yield kneecaps a young market trying to compete with traditional bank products, a tension the Daily Signal notes is also splitting US lawmakers between crypto industry lobbyists and small-bank advocates worried about deposit flight. Whether the European Commission sides with the central banks or crypto industry groups pushing back on tighter rules will shape how MiCA's 2027 revision actually reads, and whether Frankfurt's parallel bet on Pontes and a digital euro pays off before dollar stablecoins get further entrenched in European commerce.