ECB President Christine Lagarde pushed back on calls for euro-denominated stablecoins, stating they are not an efficient way to strengthen the euro's international role. Speaking at the Banco de España LatAm Economic Forum, she acknowledged the global stablecoin market's growth to over $317 billion, nearly 98% denominated in U.S. dollars, but warned that stablecoin gains are outweighed by material trade-offs. Lagarde flagged two primary risks: financial instability from sudden redemptions, citing Circle's near-depeg during the Silicon Valley Bank collapse, and weakened monetary policy transmission as deposits shift from banks to non-bank stablecoins. She emphasized that Europe should focus on deeper capital market integration and stronger safe assets rather than replicating U.S. instruments. Industry leaders criticized Lagarde's stance, warning that inaction could entrench dollar dominance and send negative signals to private investors. With the U.S. advancing the GENIUS Act to cement dollar stablecoin dominance, they argue that missing the stablecoin wave may hamper the euro's role in on-chain cross-border payments. Lagarde's remarks contrast with earlier support from Bundesbank President Joachim Nagel, who saw potential benefits for low-cost cross-border payments.

Key facts

• ECB President Lagarde said euro stablecoins are not an efficient way to boost the euro's global role.
• She warned of financial instability from sudden redemptions, citing the 2023 USDC depeg event.
• Another risk is weakened monetary policy transmission if deposits migrate to non-bank stablecoins.
• Industry leaders fear Europe's stance will entrench dollar dominance and discourage private investment.
• Lagarde advocates for deeper capital market integration and safe assets over stablecoin adoption.

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