Lagarde warns euro stablecoins threaten financial stability

Lagarde warns euro stablecoins threaten financial stability and euro sovereignty, urging Europe to reject the U.S. model and focus on a digital euro and stricter regulations.

European Central Bank President Christine Lagarde has issued a strong warning against euro-denominated stablecoins, highlighting their significant risks to financial stability and the effectiveness of monetary policy in the eurozone. Lagarde acknowledged that stablecoins could offer benefits, such as lowering financing costs and enhancing the euro’s global role. However, she emphasized that these advantages are outweighed by threats like destabilizing the banking sector, undermining monetary policy transmission, and introducing vulnerabilities through reserve-currency expansion. She cautioned against turning stablecoins into yield-generating assets, which could lead to uncontrolled capital flows. Lagarde urged Europe not to follow the U.S. stablecoin model but to focus on developing a digital euro and public blockchain-based settlement systems. She called on EU lawmakers to tighten regulations and close loopholes to protect the euro’s sovereignty and financial stability.