EU central banks want to extend the stablecoin interest ban to staking and lending as 50,000 letters demand the opposite

More than 50,000 Europeans have urged the European Commission to let stablecoin providers offer cashback and loyalty rewards, but the European System of Central Banks wants the opposite. In a Sept. 22 submission, the ESCB asked Brussels to extend the MiCA interest ban to lending, borrowing and staking, a move that would hit exchanges and DeFi platforms that pay yield on stablecoins.

Stand with crypto EU mobilizes thousands against stablecoin restrictions

Stand With Crypto EU organized the letter-writing campaign to encourage European residents to participate in the Commission’s MiCA review. According to the advocacy group, the initiative collected more than 50,000 letters from individuals seeking changes to the existing rules.

The organization argues that current restrictions place cryptocurrency companies at a disadvantage compared with traditional financial institutions. Under MiCA, stablecoin issuers are prohibited from paying interest to token holders or offering certain financial incentives.

The group wants regulators to reconsider these limitations and permit compliant stablecoin providers to introduce cashback offers, loyalty programs and transaction fee discounts.

Harry Pearce-Gould, general manager of Stand With Crypto EU, said the campaign demonstrated that stablecoin users wanted their opinions considered during the regulatory review.

“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 campaign attracted considerably more participation than previous European cryptocurrency consultations. Its organizers also highlighted a separate petition supporting more permissive stablecoin regulations, which has collected over 126,000 signatures.

The participation figures underline the growing public interest in how European authorities regulate digital assets. However, the Commission has yet to announce whether the submissions will result in changes to the existing framework.

European central banks want broader stablecoin interest ban

While cryptocurrency advocates are seeking greater flexibility, the European System of Central Banks (ESCB) has recommended strengthening the existing restrictions.

In its September 22 submission to the Commission’s consultation, the ESCB called for extending the stablecoin interest ban to cover lending, borrowing and staking services that could provide indirect financial returns to token holders.

The central banking body argued that these arrangements could effectively reproduce interest payments through alternative financial products, potentially undermining the purpose of the existing restrictions.

The ESCB also warned that allowing stablecoins to generate returns could blur the distinction between electronic money and traditional bank deposits.

Its submission stated that electronic money is intended primarily for payments rather than savings. The central banks therefore want regulators to prevent cryptocurrency platforms from circumventing the existing rules through alternative reward mechanisms.

The proposal could have significant implications for crypto exchanges and decentralized finance platforms operating in Europe. If adopted, it could restrict several ways users currently earn returns on their stablecoin holdings.

The European Banking Authority has also recommended regulating crypto lending, including activities associated with decentralized finance, highlighting broader regulatory concerns about emerging cryptocurrency services.

Banking risks drive calls for tighter regulations

Beyond restrictions on rewards, European central banks have raised concerns about how stablecoin issuers manage their reserves.

Under existing MiCA requirements, stablecoin issuers must maintain at least 30% of certain reserves in bank deposits. The requirement increases to 60% for significant stablecoins.

The ESCB has proposed replacing these requirements with liquidity standards based on how quickly reserve assets can be converted into cash.

Central bankers argue that large-scale stablecoin redemptions could force issuers to withdraw substantial amounts of money from commercial banks within a short period. Such withdrawals could create additional pressure on financial institutions during periods of market instability.

The European Central Bank has previously warned that stablecoins could affect the traditional banking system if consumers move substantial amounts of money from bank accounts into digital tokens.

ECB President Christine Lagarde has also highlighted the potential consequences for bank lending and monetary policy. In a May 2026 speech, she explained that large-scale migration of retail deposits into stablecoins could weaken the banking system’s ability to provide credit to businesses and households.

These concerns have become central to the debate over the stablecoin interest ban, with policymakers examining how digital assets might affect financial stability as adoption increases.

Brussels faces competing demands as MiCA review ends

The disagreement between cryptocurrency advocates and European banking authorities presents the European Commission with competing proposals for the future of digital asset regulation.

Stand With Crypto EU maintains that regulated companies should have more flexibility to offer incentives to customers. Its campaign also received support from cryptocurrency and financial services organizations, including Boerse Stuttgart Digital and IOTA.

Meanwhile, the ESCB wants regulators to close potential loopholes that could allow stablecoin holders to earn indirect returns through lending and staking.

The Commission’s consultation, which opened on May 20, was designed to assess whether MiCA remains suitable for the rapidly evolving cryptocurrency market. Its September 30 deadline marked the end of the formal consultation period, not the completion of the regulatory review.

The Commission is expected to examine the submissions before determining whether legislative amendments are necessary. Any proposed changes would still need to go through the relevant European legislative process.

For cryptocurrency businesses, the outcome could determine how they structure their products and customer incentives across the European Union.

The debate over the stablecoin interest ban therefore extends beyond cashback and loyalty programs. It also raises broader questions about competition, consumer protection, financial stability and the role of digital assets in Europe’s financial system.

With thousands of citizens and major financial institutions presenting opposing views, the Commission now faces the task of weighing innovation against the risks identified by banking authorities. Its eventual decisions could shape the regulatory environment for European stablecoins in the years ahead.