European Central Banks Call For Ban On Stablecoin Yield

Calls for a ban on stablecoin yield are growing louder across Europe.

Central banks in the European Union want crypto platforms to be prevented from using lending, borrowing, staking, and other products that offer returns and rewards on stablecoin holdings.

"Electronic money is intended to be used for making payments and not as a means of saving," said the European System of Central Banks (ESCB).

The group said in a filing to the European Union that it "continues to support the prohibition on paying remuneration on stablecoins."

Commercial banks have lobbied hard against allowing yield on stablecoins and other cryptocurrencies, arguing that it will compete with deposits on savings and checking accounts.

The group of European central banks says the ban on crypto yield should not be limited to services already governed by regulations and should also cover unregulated activities such as crypto lending, borrowing, and staking.

The central banks said that allowing yield on stablecoins will blur the distinction between electronic money and bank deposits, as well as undermine Europe's financial system.

The arguments being made in Europe echo the debate in the U.S. over the Clarity Act legislation.

In America, eight U.S. banking groups urged lawmakers to tighten the bill's restrictions on stablecoin rewards, claiming that crypto platforms could otherwise offer interest-like returns that compete with bank deposits.

The Clarity Act recently failed to advance in the U.S. Senate.

The two largest stablecoins are Tether's USDT (CRYPTO: $USDT) and Circle Internet Group's (NYSE: $CRCL) USDC (CRYPTO: $USDC).