European Central Bank President Christine Lagarde has voiced strong scepticism regarding the necessity of stablecoins pegged to the euro, suggesting they could impede the ECB’s operational capacity and amplify financial instability. Her comments come as several major euro zone banks, including Societe Generale, are actively developing crypto assets linked to the single currency. These initiatives aim to challenge the US dollar’s dominance in the digital asset market and bolster the euro’s international standing.
Speaking in Spain, Lagarde contended that the rationale for euro-denominated stablecoins is “far weaker than it appears.” She highlighted their susceptibility to “runs” during market turmoil, similar to the USD Coin’s value drop during the Silicon Valley Bank collapse, and argued they could diminish the ECB’s ability to implement interest-rate policy effectively across the economy. Lagarde asserted that the potential short-term gains in financing conditions and global reach offered by stablecoins are outweighed by these significant trade-offs, concluding they are “not an efficient way” to enhance the euro’s appeal.
Instead, Lagarde advocated for tokenised commercial bank deposits as a superior alternative, citing their inherent safety over stablecoins while still allowing circulation on blockchain technology. Her stance, however, places her at odds with the European Commission and governments like France, who view euro stablecoins as vital tools for elevating the euro’s international status. Despite this divergence, European regulations already mandate that stablecoin issuers hold at least 30% of reserve assets in bank deposits, with the remainder in low-risk, highly liquid financial instruments such as government bonds. Bundesbank board member Michael Theurer, while acknowledging stablecoin risks, recently described both tokenised deposits and stablecoins as “crucial.”
