The head of the European Central Bank (ECB) stated that Europe shouldn’t copy the American approach to stablecoin market development for the sake of competition, adding that euro-pegged stablecoins pose risks to the EU’s financial stability and monetary policy.
Christine Lagarde, President of the ECB, speaking at the Banco de España LatAm Economic Forum in Spain, outlined the bank’s position on the development of digital payment infrastructure and the stablecoin market within the EU.
She stated that the debate surrounding stablecoins often conflates two separate functions of the technology, monetary and technological. In her view, this leads to misguided conclusions about the need to aggressively promote euro-pegged stablecoins in response to the growing influence of the United States. She also noted that the GENIUS Act is being viewed by the U.S. administration not only as a regulatory framework but also as a tool to support the global dominance of the dollar and demand for U.S. Treasuries.
Lagarde acknowledged that stablecoins do simplify cross-border payments and provide easier access to dollar-denominated assets outside the U.S., especially in countries with weak national currencies. In Latin America, the volume of such transactions already accounts for around 7.7% of GDP, while in Africa and the Middle East it represents approximately 6.7% of GDP. In addition, about 60% of stablecoin payment turnover already comes from cross-border B2B settlements, although this still represents only 0.01% of global corporate cash flows.
However, Lagarde also pointed to the potential impact of stablecoins on the U.S. government debt market. According to research, an inflow of $3.5 billion into dollar-pegged stablecoins can reduce yields on three-month U.S. Treasury bills by 2.5 to 3.5 basis points, while the effect doubles during periods of liquidity shortages.
Lagarde further warned that widespread use of euro-pegged stablecoins could weaken the effectiveness of ECB monetary policy. According to her, if individuals and companies begin shifting funds from bank deposits into stablecoins, banks could face greater difficulty attracting funding and issuing loans, while the influence of ECB interest rate decisions on the economy would diminish. She also recalled the events of March 2023, when the collapse of Silicon Valley Bank destabilized the stablecoin market.
Despite criticizing the monetary role of stablecoins, the ECB President expressed support for distributed ledger technology (DLT), particularly in the context of asset tokenization. According to Lagarde, digital infrastructure makes it possible to integrate issuance, trading, settlement, and custody of assets into a single system with automated execution of operations.
Lagarde also emphasized that Europe is prioritizing settlement infrastructure based on central bank money rather than private stablecoins. She noted that the Eurosystem plans to launch the Pontes project in September, which will connect DLT platforms to the TARGET system for settlement in central bank money. In addition, the Appia project aims to create a fully interoperable European tokenized financial infrastructure by 2028. In Lagarde’s view, settlement in central bank money combined with the development of tokenized bank deposits will allow Europe to avoid dependence on dollar-backed stablecoins within the digital financial system.
ECB experts previously concluded that stablecoins don’t currently pose a threat to eurozone financial stability due to the MiCA regulatory framework and the relatively limited use of stablecoins outside the crypto ecosystem.
