ECB rejects proposals on euro stablecoins

The European Central Bank (ECB) has warned EU finance ministers that proposals to expand the issuance of euro stablecoins could weaken the bank lending system and complicate monetary policy. According to Reuters, these objections were raised at an informal meeting of the Economic and Financial Affairs Council in Nicosia in response to a report prepared by the Bruegel think tank. This is reported by Cointelegraph.com reports .

Bruegel analysts had proposed easing liquidity requirements for issuers and granting them access to ECB funds to help the euro stablecoin market catch up with dollar-pegged competitors. Reportedly, while 38% of global stablecoin transactions are conducted by Europeans, euro-denominated tokens account for only 0.3% of the total supply. Although EURC, issued by Circle, is currently the largest euro stablecoin, it ranks only 12th globally.

ECB President Christine Lagarde opposed these proposals, warning that stablecoin issuance could reduce bank deposits and increase bank funding costs. According to her, this process would undermine the central bank's ability to manage interest rates. Several central bankers attending the meeting also questioned the idea of granting "lender of last resort" status, intended only for regulated banks, to stablecoin companies.

Christine Lagarde expressed a preference for tokenized financial infrastructure based on central bank money rather than stablecoins. She cited the Eurosystem's Project Pontes and the Appia roadmap for wholesale settlements as examples. While Bruegel authors argued that stricter rules compared to the US could accelerate digital dollarization, ECB officials dismissed these concerns, instead calling for restrictions to protect against sudden reserve outflows.