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Stablecoin incentives move to the forefront of the MiCA review

Stablecoin rules have been thrown back into the spotlight in the European Union. Crypto advocacy group Stand With Crypto EU said more than 50,000 people have called on the European Commission to soften current restrictions as part of its review of the Markets in Crypto-Assets Regulation (MiCA).

The campaign gained momentum as the Commission’s MiCA review consultation closed on Wednesday. The group is seeking permission for regulated stablecoin issuers and crypto service providers to offer users incentives such as cash-back, loyalty rewards and transaction fee discounts.

According to Stand With Crypto EU, the number of supporters who wrote to the Commission during the consultation phase has topped 50,000. A separate petition has gathered more than 126,000 signatures in favor of a more flexible EU approach.

Why is the current ban being debated on competition grounds?

MiCA prohibits stablecoin issuers and crypto service providers from paying interest on these products. The campaign group argues that the ban puts stablecoins at a disadvantage compared with bank deposits and other e-money products that can offer user benefits.

Data shared by the group shows the campaign drew more than six times as much support as the 8,221 responses received by the ECB (European Central Bank) in its digital euro consultation. It also far exceeded the 198 responses collected by the European Commission in its 2020 consultation on crypto rules.

Supporters believe that allowing incentives could boost the adoption of euro-denominated stablecoins and improve their ability to compete with dollar-based stablecoins. The issue is also being framed as an economic question tied to the EU’s room to maneuver in payments and the international role of the euro.

Central banks want stricter rules

European central banks, by contrast, want MiCA’s stablecoin provisions tightened further. In an opinion dated September 22, the ESCB (European System of Central Banks) suggested expanding the interest ban to cover lending, borrowing and yield-generating staking activities.

The ESCB also floated replacing MiCA’s requirement that issuers hold a minimum share of reserves in bank deposits with liquidity thresholds. Central banks say that if a stablecoin experiences a sudden outflow, rapid withdrawals from deposits could put pressure on credit institutions.

Key risks highlighted for market impact

  • The ECB said in June that stablecoin transactions can take place around the clock, while reserve assets remain tied to traditional settlement schedules, potentially creating liquidity mismatches.
  • ECB President Christine Lagarde warned in May that a shift from bank deposits into stablecoins could weaken credit flows and the transmission of monetary policy.

The picture suggests the EU’s stablecoin market could face pressure from both sides in the months ahead: calls for stronger incentives on one hand, and demands for tighter oversight in the name of financial stability on the other.

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