The ECB has warned EU finance ministers that expanding euro stablecoins could weaken bank lending and monetary policy transmission.
The warning came in response to a paper prepared by Brussels-based economic think tank Bruegel, which called for easing liquidity requirements for crypto asset issuers and granting them potential access to ECB funding. The paper's authors argued that tighter EU rules, compared with those in the US, risk driving stablecoin activity outside the bloc and accelerating what they described as 'digital dollarisation', a scenario in which dollar-backed tokens come to dominate cross-border digital payments at the expense of euro-denominated alternatives.
Stability concerns overshadow growth ambitions
According to Reuters, ECB officials, including the institution's president, pushed back firmly against the Bruegel proposals. The central bank's concern centres on the mechanics of stablecoin issuance: when a consumer purchases a stablecoin, the funds are transferred to the issuer rather than remaining as a deposit in the banking system. At scale, this process could accelerate disintermediation by reducing the stable funding base that banks rely upon to extend credit and raising their cost of funding. In addition, central bankers also warned that the proposal to extend ECB lender-of-last-resort status to stablecoin issuers (a backstop currently reserved for regulated banks) represented a significant departure from established policy.
ECB officials present at the meeting played down the digital dollarisation risk, and several called for EU rules to prevent holders of stablecoins from redeeming tokens in Europe, citing the potential for runs on reserves.
The debate sits against a broader regulatory backdrop. The EU's Markets in Crypto-Assets Regulation (MiCAR), in force since 2024, requires stablecoin issuers to hold a substantial proportion of reserves in bank deposits and other liquid assets. In the US, the GENIUS Act, adopted in 2025, imposes lighter requirements, explicitly designed to support the global role of the dollar through regulated dollar-backed tokens.
Market context and the digital euro
The scale of the gap between the two markets is stark. Global stablecoin supply grew by approximately a third in 2025 to USD 300 billion, according to Artemis data cited in the Bruegel paper. Euro-denominated stablecoins account for just 0.3% of that total, with the largest ranking 20th globally, while Europe-based stablecoin transactions nonetheless represented 38% of global transaction volumes in the fourth quarter of 2025, suggesting significant latent demand.
Industry efforts are underway to close the gap. A consortium of European banks operating under the Qivalis project has grown to 37 institutions across 15 countries and is targeting a euro-denominated stablecoin launch later in 2026. Société Générale has pursued earlier, smaller-scale initiatives in the same space.
The ECB has indicated a preference for tokenised commercial bank deposits over stablecoins, representing an approach that would preserve existing account safety while incorporating distributed-ledger programmability. Finance ministers at the Cyprus meeting confirmed they would continue work on the digital euro, which the ECB aims to launch in 2029. That project has itself drawn resistance from banks concerned about deposit outflows.
