Why Did the ECB Push Back on Euro Stablecoin Support?
The European Central Bank has pushed back against a proposal that would loosen liquidity requirements for euro stablecoin issuers and potentially give them access to central bank funding, drawing a clear line between private token issuance and the ECB’s role as lender of last resort.
The proposal, presented through a Bruegel policy brief to EU finance ministers and central bank governors at an informal meeting in Nicosia, Cyprus, argued that Europe needs more permissive rules to build a meaningful euro stablecoin market. Its authors said the current framework risks leaving the sector dominated by dollar-denominated tokens while euro products remain marginal.
The disagreement is not only about stablecoins. It is about whether Europe should treat private euro tokens as strategic infrastructure or as a potential threat to bank funding and monetary control. The ECB’s answer is clear: stablecoin growth should not come at the cost of weakening the banking system’s deposit base.
How Would Stablecoins Affect Bank Funding and Rate Policy?
The ECB’s concern is that stablecoin issuers could become large holders of liquidity that would otherwise sit inside commercial banks. If users move deposits into stablecoins, banks may need to pay more to attract funding or rely more heavily on wholesale markets. That would make credit more expensive and could reduce lending capacity.
Central bankers also raised concerns about interest-rate transmission. Monetary policy in the euro area works partly through banks. When the ECB changes rates, those changes filter through deposit pricing, lending costs, and credit conditions. A large stablecoin market outside the bank deposit system could weaken that transmission channel.
Several officials also resisted the idea of giving stablecoin issuers access to ECB liquidity. That would place private token firms closer to the central bank safety net, a role traditionally reserved for supervised banks. For the ECB, that would blur the boundary between regulated deposit-taking institutions and crypto-linked issuers that do not play the same role in credit creation.
Lagarde had already made the ECB’s position public earlier this month, saying, “The case for promoting euro-denominated stablecoins is far weaker than it appears.” Her argument is that any possible gain for the euro’s international role is outweighed by financial stability and monetary-policy risks.
Investor Takeaway
The ECB is treating euro stablecoins as a bank-funding risk, not just a crypto market product. That stance makes a lighter European regime less likely and raises the compliance burden for issuers seeking scale under MiCA.
Is Europe Risking Digital Dollarization?
Bruegel framed the issue as a competitiveness problem. The think tank warned that tougher EU rules, compared with the US GENIUS Act signed into law in July 2025, could push issuance and trading offshore while reinforcing the dominance of dollar-backed stablecoins.
That argument speaks to a real market imbalance. Global stablecoin supply expanded to about $300 billion in 2025, while euro-pegged tokens accounted for only 0.3% of the market. Circle’s EURC remains the largest euro-denominated token, but the category is still tiny compared with dollar stablecoins.
Supporters of more permissive rules argue that Europe cannot build a competitive euro token market if issuers face heavier reserve and liquidity standards than their US counterparts. They see stablecoins as a tool for payments, settlement, and currency influence in digital markets.
Central bankers took the opposite view. They played down the “digital dollarization” risk and focused instead on redemption pressure. Several officials argued that stablecoins should face redemption restrictions regardless of where they are issued, warning that a European entity could face a run on reserves if foreign holders redeem at scale.
The fight lands as the European Commission reviews the Markets in Crypto-Assets Regulation, which has been in force since 2024. MiCA requires stablecoin issuers to hold a large share of reserves in bank deposits and other liquid assets. The US framework is lighter, giving dollar issuers a clearer growth advantage but also deepening the policy split between Washington and Frankfurt.
Why Are Banks Still Moving Into Euro Stablecoins?
The ECB’s resistance has not stopped banks from preparing their own euro stablecoin products. The Qivalis consortium, an Amsterdam-based joint venture seeking authorization from De Nederlandsche Bank, has expanded to 37 banks across 15 countries and plans to launch a MiCA-compliant euro stablecoin in the second half of this year.
The group includes BNP Paribas, ING, UniCredit, CaixaBank, and Danske Bank among its founders, with ABN Amro, Rabobank, Nordea, and Intesa Sanpaolo also joining. Societe Generale has also pursued earlier euro stablecoin efforts, showing that European banks are not waiting for the policy debate to settle before testing tokenized money products.
Bank involvement changes the market structure question. A euro stablecoin issued or backed by banks may fit more comfortably with the ECB’s preference for deposit-based money inside supervised institutions. That is why Lagarde has pointed instead to tokenized commercial bank deposits and the ECB’s Pontes and Appia wholesale settlement projects as the preferred onchain infrastructure for Europe.
The ECB also still aims to launch a digital euro by 2029. EU finance ministers reaffirmed at the Nicosia meeting that work on the project will continue. Banks have separately resisted the retail CBDC plan because it could also pull deposits out of the banking system, creating a similar funding concern to the one now being raised against private euro stablecoins.
The policy direction is therefore becoming clearer. Europe may allow euro stablecoins to develop, but the ECB does not want them supported by lighter liquidity rules or central bank funding. For issuers, the path to scale will likely run through bank partnerships, MiCA compliance, and tokenized deposit models rather than a US-style stablecoin regime built for rapid private-sector expansion.
