The ECB blocks the rise of stablecoins in euros and warns of a risk for financial stability

The European Central Bank is toughening its tone against euro stablecoins. Meeting this week with European Union finance ministers, the ECB rejected several proposals intended to promote their development, believing that they could threaten the financial stability of the bloc. This position comes as dollar-backed stablecoins largely dominate the global market and increase pressure on Europe in the race for digital payments.

ECB rejects proposals to accelerate euro stablecoins

While France pushes Europe to promote euro stablecoins, tension rose a notch during a meeting of European Union finance ministers in Nicosia. Indeed, the ECB firmly rejected several proposals from the Bruegel think tank intended to support the development of stablecoins denominated in euros.

Christine Lagarde opposed this approach by estimating that it could weaken the European banking system and weaken the monetary control of the central bank.

Here is the main concerns expressed by the ECB:

• A massive transfer of bank deposits to private stablecoins;
• An increase in the cost of financing European banks;
• A weakening of the transmission of monetary policy;
• A risk of liquidity crisis in the event of a loss of confidence in reserves;
• The refusal for the ECB to become a lender of last resort for stablecoin issuers.

The European institution believes that implicit support for private stablecoins could create a dangerous precedent for the financial stability of the euro zone. This caution comes as the European Union already applies the MiCA regulation, considered one of the strictest regulatory frameworks in the world for cryptos. Behind this hard line, Frankfurt seeks above all to prevent the emergence of players capable of directly competing with traditional bank deposits on a large scale.

Europe fears total domination of the digital dollar

The debate now goes beyond the regulatory framework. Euro stablecoins remain extremely marginal in the global crypto ecosystem today. They represent only 0.3% of the global supply of stablecoins, even though European users carry out almost 38% of global transactions linked to these assets. The main euro stablecoin, Circle's EURC, remains far behind dollar-backed giants like USDT or USDC. This situation feeds the concerns of several European officials who fear a form of “digital dollarization” of the payments market.

Faced with this rise in power of American stablecoins, the ECB is defending another strategy. The institution favors bank deposits linked to tokenization as well as financial infrastructures supported directly by the central bank, in particular via the Pontes and Appia projects. At the same time, work on the digital euro continues with a timetable that would aim for a launch around 2029. This approach contrasts with the dynamics observed in the United States, where the GENIUS Act bill could further accelerate the expansion of private stablecoins linked to the dollar.

This confrontation between European prudence and American offensive could reshape the digital monetary balance in the coming years. The ECB is trying to protect the financial stability of the euro zone by favoring the digital euro without allowing the emergence of a private player capable of competing with traditional banks. It remains to be seen whether this strategy will actually allow Europe to maintain its place in the global digital economy, as the dollar continues to expand its influence at the very heart of the crypto industry.