The European Central Bank (ECB) has warned about the risks associated with the issuance of euro stablecoins, stating they could reduce bank lending and complicate interest rate control. This was reported by Reuters citing sources.

The concern stems from a memo by the Brussels-based think tank Bruegel. The authors of the document proposed:

  • to ease liquidity requirements for issuers;
  • to consider access to ECB financing;
  • to support the development of the European stablecoin market, which is currently dominated by dollar-pegged coins.

This idea was presented on May 22 at a meeting of financial officials in Nicosia. According to the agency, the initiative faced immediate resistance from regulatory representatives, including ECB President Christine Lagarde.

The ECB believes that the proliferation of stablecoins could weaken the stability of bank deposits. When a token is issued, users' funds move to the issuer's accounts, ceasing to be a stable source of funding for banks.

A mass shift of funds into stablecoins could also accelerate disintermediation, complicate fundraising, and limit banks' ability to issue loans, regulators fear.

Earlier in May, Lagarde had already expressed criticism of euro stablecoins, advocating instead for tokenized bank deposits. In her view, these combine the reliability of traditional accounts with the speed and programmability of distributed ledger technology.

The Dollar in Europe

Bruegel warned that stricter regulation of stablecoins in the EU compared to the US could push activity outside the bloc and intensify "digital dollarization."

Some central banks have downplayed this risk. Others have called for a ban on the redemption of stablecoins issued both in the EU and the US to prevent pressure on the reserves of local issuers.

The European Commission is currently reviewing the MiCA regulation, which will take effect in 2024. This regulation requires stablecoin issuers to hold a significant portion of their reserves in bank deposits and other liquid assets.

Reuters journalists noted that the GENIUS Act, passed in the US in 2025, establishes softer requirements and aims to support the global role of the dollar through regulated USD tokens.

According to Artemis, as cited by Bruegel, the supply of stablecoins has increased by about one-third over the past year, reaching $300 billion.

However, euro-pegged tokens account for only 0.3% of the total supply. The largest among them, EURC from Circle, ranks approximately 20th by market capitalization among stablecoins.

Notably, Europe accounted for 38% of global stablecoin transactions in the fourth quarter of 2025.

As a reminder, in April, the ECB signed agreements with three European organizations to standardize payments for the digital euro.