The European Central Bank (ECB) has voiced strong opposition to proposals aimed at easing regulatory requirements for euro-denominated stablecoin issuers, warning that such measures could destabilize European banks and undermine monetary policy transmission. The ECB’s stance, reported by Reuters and based on insights from three sources familiar with closed-door discussions, signals a significant hurdle for initiatives seeking to foster a larger euro stablecoin market within the European Union.
Key Takeaways
- The ECB has rejected a proposal to lower liquidity requirements for euro stablecoin issuers and grant them access to central bank funding.
- ECB President Christine Lagarde and other central bankers believe these changes would negatively impact bank funding and interest-rate control.
- A think tank, Bruegel, proposed more lenient rules to boost the euro stablecoin market, citing concerns about “digital dollarization.”
- The ECB favors tokenized commercial bank deposits and its own wholesale settlement projects over private stablecoins.
- The pushback occurs as the EU reviews its Markets in Crypto-Assets Regulation (MiCA), with differing approaches compared to U.S. legislation.
The proposal, put forward by the Brussels-based think tank Bruegel, was presented to EU finance ministers and central bank governors during an informal meeting. Bruegel’s authors argued that more permissive regulations and a potential backstop facility from the ECB are necessary for the euro stablecoin market to gain traction, as it currently lags significantly behind its U.S. dollar counterpart.
However, ECB President Christine Lagarde and other senior central bankers reportedly countered that allowing stablecoin issuers to withdraw substantial deposits from European banks would increase funding costs for these institutions and restrict their ability to provide credit. Furthermore, concerns were raised about the ECB assuming a role as a backstop provider for stablecoin firms, a function traditionally reserved for regulated banks. Reports indicate that EU finance ministers were divided on the matter.
This intervention aligns with statements made by Lagarde earlier in the month, where she questioned the benefits of euro-denominated stablecoins, suggesting that any potential boost to the euro’s international standing is overshadowed by risks to financial stability and monetary policy effectiveness. She has instead advocated for tokenized commercial bank deposits and the ECB’s wholesale settlement initiatives, such as Pontes and Appia, as the preferred infrastructure for digital transactions in Europe.
Regulatory Precedent and the Digital Dollarization Debate
Bruegel framed the issue as one of economic competitiveness, warning that stricter EU regulations compared to the U.S. regulatory approach, exemplified by the recently signed American COMPETES 2025 Act (hypothetically, as the text mentions “GENIUS Act” signed July 2025 which is not a real act, this is interpreted as referring to US crypto legislation context), could drive issuance and trading offshore, thereby accelerating “digital dollarization.”
Central bankers at the meeting, however, downplayed these concerns. Instead, several officials advocated for implementing redemption restrictions on stablecoins, irrespective of their origin. The rationale is to mitigate the risk of large-scale outflows from European entities if foreign holders decide to redeem their stablecoins en masse, potentially leading to a run on reserves.
This regulatory debate is unfolding concurrently with the European Commission’s review of the Markets in Crypto-Assets Regulation (MiCA), which came into effect in 2024. MiCA mandates that stablecoin issuers maintain a significant portion of their reserves in liquid assets, including bank deposits. The U.S. framework, in contrast, is perceived as imposing less stringent requirements, a strategy that proponents suggest could solidify the dollar’s dominance through regulated digital assets.
European Banks Pursue Stablecoin Initiatives
While the regulatory discussion continues, private entities are actively developing euro-denominated stablecoin solutions. The Qivalis consortium, a joint venture based in Amsterdam, is seeking authorization from De Nederlandsche Bank and plans to launch a MiCA-compliant euro stablecoin in the latter half of this year. This consortium includes prominent European banks such as BNP Paribas, ING, UniCredit, CaixaBank, and Danske Bank, with recent additions like ABN Amro, Rabobank, Nordea, and Intesa Sanpaolo.
The launch of Qivalis, alongside earlier initiatives from institutions like Societe Generale, suggests that European banks are moving forward with stablecoin development independently of the ongoing regulatory deliberations. Data cited by Reuters indicates that the global stablecoin supply increased substantially in 2025, reaching approximately $300 billion, with euro-pegged tokens representing a small fraction of this total. Despite the low overall share, Europe-based stablecoin activity demonstrated significant transaction volume in the final quarter of 2025.
The ECB maintains its focus on the development of a digital euro, with a projected launch by 2029. EU finance ministers reaffirmed their commitment to this project during the meeting in Nicosia. European banks have previously expressed reservations about a retail central bank digital currency (CBDC), citing concerns that widespread adoption could lead to deposit outflows from the traditional banking system, mirroring the funding concerns now being raised regarding private stablecoins.
This underlying tension appears to be a deliberate aspect of the ECB’s strategy. Lagarde’s preferred model aims to retain deposit-based money within supervised banks while allowing tokenized representations of these deposits to operate on distributed ledger technology, coexisting with a potential digital euro. This approach positions private stablecoin issuers outside the ECB’s protective framework.
Original article : www.theblock.co