STABLECOINS | Stablecoins Not Efficient in Strengthening International Role of the Euro, Says President of European Central Bank

European Central Bank President, Christine Lagarde, has warned that euro-denominated stablecoins could threaten financial stability and weaken the ECB’s control over monetary policy, pushing back against growing calls for Europe to develop euro-backed digital tokens to strengthen the currency’s global role.

Speaking at the Banco de España LatAm Economic Forum in Spain, Lagarde said stablecoins had rapidly moved “from the periphery to the centre” of financial policy discussions, but argued that even euro-pegged versions could trigger risks similar to those seen during past banking stresses.

Lagarde said large-scale adoption of stablecoins could:

• drain deposits from traditional banks,
• undermine lending activity, and
• weaken the transmission of ECB interest-rate policy across the euro zone.

She pointed to the temporary depegging of Circle’s USD Coin during the collapse of Silicon Valley Bank in 2023 as an example of vulnerabilities in privately issued digital currencies.

Her remarks come as several European policymakers and banking groups push for euro-backed stablecoins as a way to counter the dominance of U.S. dollar-linked tokens, which account for the overwhelming majority of the global stablecoin market. Some European officials have argued that digital euro assets could help preserve Europe’s monetary sovereignty and boost the euro’s international use.

Instead of stablecoins, Lagarde reiterated the ECB’s support for a digital euro and tokenised commercial bank deposits which she said could deliver blockchain-based payments innovation without compromising financial stability.

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