Lagarde Rejects Euro Stablecoins, Cites Financial Risks

ECB President Christine Lagarde rejected calls to promote euro-denominated stablecoins on May 8 at the Banco de España Latam Economic Forum in Roda de Bará, Spain. In a speech titled “Stablecoins and the future of money: separating functions from instruments,” she said the risks to financial stability and to monetary-policy transmission outweigh potential benefits.

Lagarde pointed to events in March 2023, when Circle disclosed that $3.3 billion of USDC reserves had been held at Silicon Valley Bank and USDC briefly traded at $0.877. She framed that episode as an example of how private liabilities backing stablecoins can come under sudden stress.

She described two central concerns. First, stablecoins are private liabilities whose backing may be exposed during market stress. Second, a large shift of retail deposits into non-bank stablecoins could narrow the ECB’s main policy channel by reducing bank deposits and forcing banks to replace funding with more expensive wholesale sources, with potential knock-on effects for bank lending and the pass-through of interest-rate changes.

The ECB’s research supports those concerns. A working paper published in March 2026 (No. 3199) found that large-scale deposit substitution would weaken bank lending and reduce the effectiveness of monetary policy. The paper noted the effect is stronger in bank-centric economies such as the euro area.

Lagarde acknowledged that regulated euro stablecoins under the EU’s Markets in Crypto-Assets Regulation, which took effect in 2024, could raise demand for euro-area safe assets and extend the euro’s international use. “The case for promoting euro-denominated stablecoins is far weaker than it appears,” she remarked.

Nearly 98% of stablecoins are pegged to the U.S. dollar. The global stablecoin market has grown from under $10 billion about six years ago to more than $300 billion today, led by dollar-denominated coins. The U.S. GENIUS Act, currently advancing through Congress, frames stablecoin expansion as a way to support demand for U.S. Treasuries.

Views within the Eurosystem differ. Bundesbank President Joachim Nagel, a member of the ECB Governing Council, voiced support for euro stablecoins on Feb. 16, 2026, saying they can be used for low-cost cross-border payments by individuals and firms.

Rather than promote private euro stablecoins, Lagarde highlighted Eurosystem infrastructure projects that would let distributed ledger transactions settle in central bank money. The Pontes project, scheduled to launch in September 2026, will link DLT platforms to TARGET, the ECB’s settlement system. The Appia roadmap, published in March 2026, sets steps toward an interoperable tokenized financial ecosystem by 2028.

Banks and payment firms preparing MiCAR-compliant euro stablecoin products have been developing offerings. The ECB presented central bank-anchored settlement as an alternative to private stablecoins and said the system’s work aims to capture innovation benefits while avoiding imported vulnerabilities.