ECB’s Lagarde flags euro-denominated stablecoins as financial stability risk, diverging from Bundesbank stance

ECB President Christine Lagarde on Friday made one of her most direct cases yet against euro-denominated stablecoins, arguing the risks to financial stability and monetary-policy transmission outweigh any benefit to the euro’s global standing.

Speaking at the Banco de Espana LatAm Economic Forum in Spain, Lagarde pushed back against the view that Europe needs its own stablecoin ecosystem, a position Bundesbank President Joachim Nagel publicly backed in February.

“The case for promoting euro-denominated stablecoins is far weaker than it appears,” she said.

The core of her argument was a separation between what she called the monetary function of stablecoins — extending reserve-currency reach — and their technological function, which she said can be served through public infrastructure anchored in central bank money.

Europe’s task, she argued, is not simply to “replicate instruments developed elsewhere.”

The specific trade-offs she cited include bank runs and de-pegging events of the kind that rippled through markets during the 2023 SVB-Circle episode, deposit substitution that narrows the bank lending channel in Europe’s bank-dependent financial system, and broader fragmentation risk.

She also referenced an ECB working paper from March that warned widespread stablecoin adoption would pose major risks to euro-area banks and the institution’s monetary sovereignty, particularly when linked to foreign currencies.

Lagarde pointed instead to the ECB’s own tokenized wholesale settlement projects — Pontes and Appia — as the appropriate infrastructure for Europe’s digital finance ambitions, alongside deeper capital markets integration through the savings and investments union.

Familiar rhetoric

The speech extends a consistent pattern from the President of the European Central Bank.

Back in September 2025, Lagarde urged stricter oversight of non-EU stablecoin issuers at a conference, calling for tighter MiCAR enforcement to prevent foreign issuers from exposing EU reserves to runs. Her warnings on stablecoins also stretch back to at least 2023, when she argued they posed greater privacy risks than a digital euro, The Block reported.

Friday’s speech sharpened that long-running skepticism into a direct challenge to the euro stablecoin case specifically.

The escalation in Lagarde’s rhetoric is notable given the growing momentum among European banks and payment firms toward rolling out their own products under MiCAR.

A consortium of 12 major European lenders is already moving to compete in that space. Operating under a Netherlands-based joint venture called Qivalis, the group is targeting a commercial launch of a MiCA-regulated, euro-denominated stablecoin in the second half of 2026.

The debate plays out against a lopsided market.

USD-backed stablecoins account for the overwhelming majority of total stablecoin supply, while non-dollar-denominated tokens represent a fraction of the market, according to The Block’s data dashboard.

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