ECB Chief Warns Euro Stablecoins Push Could Weaken Financial Stability

Highlights:

• Lagarde said Europe should not promote euro stablecoins only because dollar stablecoins are growing.
• She warned that private stablecoins could create financial stability and monetary policy risks.
• The ECB wants safer blockchain settlement through central bank money and public infrastructure.

European Central Bank (ECB) President Christine Lagarde said Europe should not rush to promote euro-denominated stablecoins only because dollar stablecoins are growing fast. In a speech at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, on Friday, Lagarde said the debate should focus on what stablecoins are actually used for, not only on the tokens themselves.

Lagarde said stablecoins have moved from a small crypto tool into a major policy issue. According to the ECB speech, the stablecoin market has grown from less than $10 billion six years ago to more than $300 billion today. Most of that market is linked to the U.S. dollar, while nearly 90% is controlled by Tether and Circle.

Stablecoins are not an efficient way to strengthen the international role of the euro, says President Christine @Lagarde.

The best solution remains deeper capital market integration through the savings and investment union and a stronger safe asset base https://t.co/Xewr8ysz9B pic.twitter.com/vPYIUw1R00

— European Central Bank (@ecb) May 8, 2026

Lagarde Separates Stablecoin Use From Stablecoin Hype

Lagarde explained that stablecoins serve two different roles. The first is a monetary role. Stablecoins can help a currency move across borders more easily. They can also give people in weaker-currency countries faster digital access to stronger currencies.

The second role is technological. Stablecoins are used in crypto and tokenized finance as a settlement asset. However, Lagarde said these two roles are often mixed together in public debate. In her view, Europe should not assume that stablecoins are the only way to get the benefits of new financial technology. She said the case for promoting euro stablecoins becomes weaker when these functions are separated.

Euro Stablecoins Bring Benefits but Serious Risks

Lagarde said euro-denominated stablecoins could bring some short-term benefits. They could increase demand for euro-area safe assets and support the euro’s global reach. Still, she warned that the risks are serious.

One major concern is financial stability. Stablecoins depend on investor confidence and liquid reserves. If users lose trust, many may try to redeem their tokens at the same time. Lagarde pointed to the Silicon Valley Bank collapse as an example. Circle had said $3.3 billion of USD Coin reserves were held at the bank. After the collapse, USD Coin briefly dropped to $0.877, below its promised $1 value. 

She also warned that heavy use of stablecoins could weaken the transmission of ECB interest rate decisions to the economy. If people move bank deposits into non-bank stablecoins, banks may have less stable funding to lend to businesses and households. That could make monetary policy less effective in the euro area, where banks remain a key source of credit.

ECB Backs Safer Digital Settlement

Lagarde said Europe should not copy the U.S. stablecoin model. Instead, she said Europe should build stronger capital markets and support the euro through safe public infrastructure. She also supported blockchain technology for financial markets. However, she said settlement should remain linked to central bank money, not only private stablecoins.

The ECB plans to launch the Pontes project in September. It will connect blockchain platforms with TARGET, the Eurosystem’s settlement system. The ECB is also working on the Appia roadmap to support tokenized finance in Europe by 2028.