The European Central Bank (ECB) warned European Union finance ministers on Friday that proposals to issue more euro stablecoins could reduce bank lending and make controlling interest rates harder. This follows proposals from Bruegel, a Brussels-based economic think tank, advocating for eased liquidity requirements for crypto issuers and potential ECB funding access. Bruegel conducts research and offers policy recommendations on economic issues affecting Europe. The think tank aims to cultivate a European stablecoin market, currently dominated by dollar-based tokens, with these ideas presented at an informal gathering of EU finance policymakers in Nicosia, Cyprus.
However, these suggestions met immediate resistance from central bankers, including ECB President Christine Lagarde. Their primary concern is that stablecoins could make bank deposits more fickle, weakening an economically vital sector and impeding the central bank’s capacity to manage interest rates. When a stablecoin is issued, buyer funds transfer to the issuer’s account, diminishing funding stability for banks. Policymakers fear that at scale, this could accelerate disintermediation, raise funding costs, and curb banks’ lending capacity. Lagarde has previously expressed scepticism, advocating instead for tokenised commercial bank deposits.
Bruegel economists also cautioned that more stringent EU stablecoin regulations compared to the United States risk pushing activity outside the bloc and increasing “digital dollarisation.” Central bankers, however, downplayed this fear, instead reaffirming calls for EU rules to prevent holders of stablecoins issued within the bloc and the U.S. from redeeming their tokens in Europe, potentially exposing European issuers to a run on reserves. While the EU’s Markets in Crypto-Assets Regulation (MiCAR), in force since 2024, requires significant reserves, the US GENIUS Act, adopted in 2025, imposes lighter requirements. This debate aligns with Europe’s broader push to strengthen payments autonomy, including plans for a digital euro later this decade, an initiative also facing bank resistance over potential deposit shifts.