European Central Bank (ECB) President Christine Lagarde is warning that even euro‑denominated stablecoins could threaten financial stability and weaken the ECB’s grip on monetary policy. Her latest comments land just months after Germany’s Bundesbank publicly backed euro stablecoins and a digital euro as tools to strengthen Europe’s financial sovereignty.
Lagarde Sees Euro Stablecoins as a Stability Risk
Lagarde has repeated that stablecoins, including euro‑pegged ones, are “privately issued” money that can create systemic risks. She argues that large euro stablecoins could disrupt monetary policy transmission if deposits move from commercial banks into tokenized balances. In a bank‑based euro area, she says this shift could weaken banks’ lending capacity and make rate hikes or cuts less effective.
She also highlights the risk of de‑pegs and runs on reserves, citing stress around Silicon Valley Bank’s collapse and Circle’s USDC wobble in 2023. In her view, similar shocks in large euro stablecoins could trigger sudden redemptions, force asset fire sales, and worsen market stress. Lagarde has therefore urged EU lawmakers to close loopholes in the Markets in Crypto‑Assets regime and to require strict safeguards for foreign stablecoin issuers targeting EU users.
ECB Pushes Digital Euro and Tokenized Settlement Instead
Rather than embracing private euro stablecoins, Lagarde backs a central bank‑controlled alternative. She calls a digital euro a “strategic priority” for Europe’s financial system, saying it can address some stablecoin use cases while keeping money within the central bank and commercial banking frameworks.
Lagarde has also praised tokenized settlement systems such as Pontes and Appia, which bring on‑chain settlement in central bank money instead of private coins. She says these models can offer the efficiency and programmability crypto users want while avoiding the monetary sovereignty risks she sees in large private tokens.
Germany’s Bundesbank takes a more open stance toward euro stablecoins if they are tightly regulated. President Joachim Nagel argues that euro‑pegged stablecoins could support Europe’s payment sovereignty, reduce reliance on dollar‑linked tokens, cut cross‑border payment costs, and counter “dollarization” from USD‑denominated coins.
Nagel links the links euro stablecoins to a broader strategy that also includes a digital euro and a wholesale central bank digital currency for programmable interbank payments. He presents these tools as ways to boost the euro’s global role and keep European payment infrastructure from relying too heavily on U.S. systems. Analysts estimate euro stablecoins could top 1.1 trillion euros in circulation by 2030 if the bloc backs them.
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