ECB’s Lagarde Pushes Back on Euro Stablecoins, Warns of ‘Structural Weaknesses’

ECB President Christine Lagarde pushed back Friday on calls for euro stablecoins, saying the instrument is “not an efficient way” to strengthen the euro’s international role—and that Europe should stop trying to copy the U.S. playbook.

Speaking at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, Lagarde acknowledged that the global stablecoin market, now worth over $317 billion and nearly 98% denominated in U.S. dollars, has forced a policy reckoning across advanced economies.

The GENIUS Act, advancing through the U.S. Congress, is touted by the Trump administration as a tool to ensure “the continued global dominance of the U.S. dollar” and to cement demand for US Treasuries, Lagarde noted in her remarks.

“The terms of the debate have shifted,” she said. “It is no longer about whether stablecoins should exist, but whether jurisdictions can afford to be without them.”

Lagarde acknowledged that euro stablecoins could generate additional global demand for euro area safe assets and compress sovereign yields in the short term, but said the stablecoin model has “structural weaknesses as a foundation for settlement,” noting that any gains are outweighed by at least two trade-offs she called “material.”

The first one is financial instability, as stablecoins are private liabilities whose value depends on credible backing and can face sudden, self-reinforcing redemption pressures when confidence weakens.

She pointed to Circle’s near-depeg during the Silicon Valley Bank collapse in March 2023, when $3.3 billion of USDC reserves were held at the failed lender, briefly sending the coin to $0.877.

The second risk, she noted, is monetary policy transmission, warning that large-scale deposit migration into non-bank stablecoins could weaken bank lending and reduce the pass-through of policy rates to the real economy, particularly in Europe, where banks dominate credit provision.

“We know the dangers,” she said. “And we do not need to wait for a crisis to prevent them,” Lagarde said.

Industry pushback

James Brownlee, CEO of t-0, a Tether-backed stablecoin company, told Decrypt that Europe risks falling behind as the U.S. moves quickly to entrench dollar stablecoin dominance.

“The U.S. has passed legislation, signed it into law, and created a regulatory framework that entrenches dollar stablecoin dominance,” Brownlee said, adding that “the ECB has responded with a speech explaining why Europe shouldn’t try to compete.”

“Even if the ECB is correct on the theory, the market is not waiting for the theory to become infrastructure,” he added, pointing to over $300 billion already circulating in USD stablecoins.

He warned that the signal from “Europe’s most senior monetary policymaker” is troubling, saying if “full regulatory compliance doesn’t make stablecoins welcome,” then investors will question “what exactly are we building towards.”

Europe cannot “invite private capital through the front door of regulation” only to “shut it from the policy floor,” he said.

“Stablecoins didn’t grow to $300 billion because of policy… a global liquidity network built over years,” he said, adding Lagarde “says nothing” on matching that reach, with the euro’s role “not happening by default.”

“Not actively having a EUR stablecoin or growing the ecosystem of euro stablecoins will hurt the EU,” Mouloukou Sanoh, co-founder and CEO of MANSA, told Decrypt, saying a dollarized stablecoin market could mean “a future without the EUR” in on-chain cross-border payments.

In February, ECB Governing Council member and Bundesbank President Joachim Nagel said that euro-pegged stablecoins “can be used for cross-border payments by individuals and firms at low cost” and could shield the eurozone from dollar-denominated tokens crowding out the euro in international trade.

Last month, the ECP signed agreements with three European standards bodies, ECPC, Nexo Standards, and the Berlin Group, to underpin digital euro payment infrastructure using open technical standards, a move the bank said would reduce Europe’s dependence on proprietary standards owned by international card schemes and global digital wallets.

“Europe knows which port it is sailing to,” she said. “Our task is not to replicate instruments developed elsewhere, but to build the foundations and the infrastructure that serve our own objectives.”