ECB’s Lagarde Says Stablecoins Pose Risks to Banks, Monetary Policy

European Central Bank President Christine Lagarde voiced opposition to the introduction of euro-denominated stablecoins.

In a speech on May 8, Lagarde said euro stablecoins could lower euro-area funding costs in the short term and expand the currency’s international reach. But, she added, the price would be high, Bloomberg reported.

That cost would outweigh any near-term improvement in financial conditions or boost to the euro’s global role. Stablecoins are not an efficient way to strengthen the euro’s international appeal, she said.

Most stablecoins are currently pegged to the US dollar. Their rapid growth has fueled debate in Europe over whether the region needs its own stablecoin. Joachim Nagel, president of Germany’s Bundesbank, raised the need for a euro stablecoin in February.

The ECB warned in a report released in March that broad adoption of stablecoins could pose major risks to euro-area banks and monetary sovereignty. The risks are even greater for stablecoins linked to foreign currencies such as the dollar, the central bank said.

Europe’s task is not simply to copy tools developed elsewhere, Lagarde said. She also said the ECB is pushing ahead with the digital euro, a central bank digital currency, while improving wholesale payments infrastructure.

The best solution remains the same: integrating capital markets through a savings and investment union and, over the longer term, building a safe-asset base that matches the euro’s international role, she added.