ECB Warns Against Expanding Euro Stablecoins Over Financial Stability Risks

The European Central Bank (ECB) has pushed back against proposals aimed at expanding euro backed stablecoins, warning that wider adoption could create risks for banks and make monetary policy harder to manage. The concerns were raised during a meeting of European Union finance ministers in Nicosia, Cyprus.

The debate followed a policy proposal from Brussels based think tank Bruegel, which suggested easing liquidity requirements for stablecoin issuers and potentially giving them access to ECB funding. Supporters argued these steps could help euro stablecoins compete with dominant dollar backed digital assets.

Christine Lagarde Warns of Banking Risks

ECB President Christine Lagarde reportedly opposed the idea, warning that stablecoins could weaken traditional banking by moving customer deposits away from banks toward issuers. Officials fear this shift may increase bank funding costs and reduce the ECB’s control over interest rates.

Despite Europeans accounting for nearly 38% of global stablecoin transactions, euro backed stablecoins represent only around 0.3% of total supply. The largest euro stablecoin, EURC, remains far behind major dollar pegged rivals.

MiCA Rules and Europe’s Digital Finance Strategy

European policymakers continue reviewing the bloc’s crypto framework under Markets in Crypto Assets (MiCA). While some fear strict rules could increase reliance on dollar-backed tokens, ECB officials continue to favor tokenized financial systems supported by central bank infrastructure rather than privately issued stablecoins.