ECB: "Proliferation of Dollar-Pegged Stablecoins Could Threaten Eurozone Monetary Policy"

The European Central Bank (ECB) has issued a warning that the rapid proliferation of dollar-based stablecoins could undermine the monetary policy sovereignty of the Eurozone.

According to the Financial Times (FT) on the 28th (local time), Jürgen Schaaf, Adviser to the ECB’s Directorate General Market Infrastructure and Payments, stated in an ECB blog post, "If dollar-pegged stablecoins come to be widely used in Europe for payments, savings, and settlements, the ECB’s ability to control the monetary environment could be weakened."

Schaaf noted, "The spread of dollar stablecoins in Europe could create a situation similar to 'dollarisation'—where the dollar becomes dominant—in emerging economies," and emphasized, "In such circumstances, the effectiveness of policy tools such as interest rate adjustments or money supply management would be diminished."

The ECB also expressed concerns that a 'chaotic collapse' of private stablecoins could shock the overall financial system. Schaaf stressed, "These risks are evident and must not be underestimated."

This warning comes amid ongoing concerns among central banks about the growth of stablecoins. Previously, the Bank for International Settlements (BIS) pointed out that stablecoins are not backed by central banks and are at high risk of being used for money laundering, arguing that they do not adequately perform the functions of money.

Meanwhile, the ECB is currently preparing to issue a digital euro as a measure to safeguard its monetary sovereignty. Schaaf described the digital euro as "a strong line of defense for protecting Europe’s monetary sovereignty," and explained that if Europe falls behind in the stablecoin competition, side effects such as higher funding costs compared to the United States, reduced monetary policy autonomy, and deeper geopolitical dependence could arise.