ECB’s Lagarde Pushes Back on Euro Stablecoins, Warns of ‘Structural Weaknesses’

ECB President Christine Lagarde pushed back on Friday on calls for euro stablecoins, saying the tool is “not a good way” to boost the euro’s global role – and that Europe should stop trying to copy the US playbook.

Speaking at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, Lagarde acknowledged that the world stablecoin The market, which is now more than $317 billion and about 98% of US dollars, has forced the creation of a high-quality accounting system.

The GENIUS Actwhich is going to the US Congress, is accepted by Mr. Trump as a tool to ensure that “the US dollar continues to dominate the world” and to strengthen the demand for US Treasuries, Lagarde said in a statement.

“The tone of the debate has changed,” he said. “It’s no longer whether stablecoins should exist, but whether governments can afford to live without them.”

Lagarde acknowledged that euro stablecoins could lead to global demand for the safe haven of the euro and reduce its yield in the short term, but said that the stablecoin model has “structural weaknesses as a basis for settlement,” saying that any profit is multiplied by at least two transactions that he called “things.”

The first is financial instability, such as stablecoins and personal loans whose value depends on reliable support and can face sudden, self-reinforcing redemption problems when confidence declines.

He pointed to Circle and near-depeg The collapse of Silicon Valley Bank in March 2023, in which $3.3 billion of USDC was held by a failed lender, sent the currency briefly to $0.877.

The second risk, he said, is the transmission of monetary policy, warning that a large migration of non-bank funds could weaken bank lending and reduce the transmission of inflation to the real economy, especially in Europe, where banks control lending.

“We know the danger,” he said. “And we don’t have to wait to avoid problems,” Lagarde said.

Industrial pushback

James Brownlee, CEO of t-0, Tether-backed stablecoin company, said Decrypt that Europe will be at risk of falling behind as the US moves quickly to strengthen the dominance of the stablecoin dollar.

“The United States has enacted legislation, signed it into law, and created a policy that promotes stablecoin governance,” Brownlee said, adding that “the ECB has responded with a statement explaining why Europe should not try to compete.”

“Even if the ECB is right about the theory, the market does not expect the theory to be fundamental,” he added, pointing to the $300 billion already circulating in USD stablecoins.

He warned that the signal from the “European monetary policy maker” is troubling, saying that if “following all the rules does not lead to stablecoins being accepted,” then investors will question “What exactly are we planning.”

Europe cannot “invite special funds through the front door of the law” to “close it out of the law,” he said.

“Stablecoins didn’t grow to $300 billion because of policy … it’s a global currency that’s been built for years,” he said, adding Lagarde “doesn’t say anything” comparing getting there, with the euro’s “random” operation.

“Not having a EUR stablecoin or expanding the ecosystem of euro stablecoins would hurt the EU,” Mouloukou Sanoh, founder and CEO of MANSA, said. Decryptto say that a dollarized stablecoin market would mean a “EUR-free future” for border payments.

In February, a member of the ECB Governing Council is Bundesbank President Joachim Nagel said that euro-denominated stablecoins “can be used for border payments by individuals and companies at low cost” and can protect eurozone countries from dollar-denominated tokens that block the euro from international trade.

Last month, a ECP signed agreements and the three European standards organizations, ECPC, Nexo Standards, and the Berlin Group, promote digital devices for euro payments using the principle of open technology, moving the bank said to reduce dependence on European standards for owner schemes for international cards and digital wallets around the world.

“Europe knows the port it’s going to,” he said. “Our job is not to replicate tools that have been developed elsewhere, but to build a foundation and infrastructure that meets our goals.”