ECB President Christine Lagarde has pushed back against the idea that Europe should answer dollar crypto stablecoin dominance by promoting euro-denominated stablecoins of its own, arguing instead that the region should build tokenised financial infrastructure anchored in central bank money.
In a speech at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, Lagarde framed stablecoins as one of the fastest-moving policy questions in global finance. The market, she said, has grown from less than $10 billion six years ago to more than $300 billion today, with close to 98% of stablecoins denominated in US dollars and nearly 90% controlled by Tether and Circle.
Lagarde: ECB Must Not Copy US Crypto Stablecoin Model
That concentration has turned crypto stablecoins into more than a crypto-market instrument. In Lagarde’s view, they now sit at the intersection of monetary power, financial stability and tokenised-market infrastructure.
“The growing argument is that to remain relevant, Europe must respond by promoting euro-denominated stablecoins of its own,” Lagarde said. “Otherwise, it faces a future of digital dollaritation and a loss of monetary sovereignty.”
But she argued that this framing misses the central issue. Stablecoins, according to Lagarde, perform two separate functions that are often conflated: a monetary function, by extending the reach of a currency, and a technological function, by acting as the cash leg for settlement on distributed ledger infrastructure.
“The argument I want to develop today is that once we disentangle those two functions, the case for promoting euro-denominated stablecoins is far weaker than it appears,” she said. “And a more fundamental question comes into view: do we actually need stablecoins to obtain the benefits they are said to provide? Or are we mistaking the instrument for the outcome?”
Lagarde acknowledged that stablecoins have become central to crypto settlement and increasingly relevant for cross-border payments, particularly in regions where access to stable currencies is limited. She also noted that dollar-backed stablecoins can reinforce demand for US Treasuries, especially if they become yield-bearing instruments.
That dynamic is now openly part of US policy. Lagarde pointed to the GENIUS Act, which the US administration has described not only as a consumer protection and financial stability measure, but also as a tool to support “the continued global dominance of the U.S. dollar” and strengthen demand for Treasuries.
For Europe, however, Lagarde said the monetary case for euro stablecoins is weak once risks are included. Under MiCAR, euro-denominated stablecoins could create additional demand for euro-area safe assets and marginally extend the euro’s international reach. Yet she argued that the trade-offs would be material.
The first is financial stability. Lagarde cited Circle’s USDC depeg during the Silicon Valley Bank collapse in March 2023, when Circle disclosed that $3.3 billion of USDC reserves were held at the failed bank and the token briefly fell to $0.877.
“The promise of par redemption depends on the very market confidence that can vanish when financial stability deteriorates,” she said. “And a mass redemption can accelerate that deterioration.”
The second risk is monetary policy transmission. If retail deposits migrate into non-bank stablecoins and return to banks as wholesale funding, the ECB’s rate decisions may transmit less effectively through the banking system. Lagarde said this matters particularly in the euro area, where banks remain the dominant source of credit to the real economy.
Her conclusion was blunt: stablecoins are not an efficient way to strengthen the euro’s international role. The better route, she said, is deeper capital-market integration through Europe’s savings and investments union, alongside a safe asset base that matches the euro’s global ambitions.
Where Lagarde was more constructive was on tokenisation itself. She described DLT-based market infrastructure as genuinely transformative, especially for Europe’s fragmented financial system. In 2023, the EU had 295 trading venues, 14 central clearing counterparties and 32 central securities depositories, compared with two clearing houses and one central securities depository in the US.
Stablecoins currently fill the settlement gap in tokenized markets because they provide an on-chain unit of value for atomic settlement. But Lagarde argued that private stablecoins are fragile and fragmented foundations for that role.
The ECB’s answer is public infrastructure. From September, the Eurosystem plans to offer wholesale settlement through the Pontes project, linking DLT platforms to TARGET so transactions can settle in central bank money. Lagarde also pointed to the Appia roadmap, published in March, which aims to support a fully interoperable European tokenised financial ecosystem by 2028.
“Europe knows which port it is sailing to,” Lagarde concluded. “Our task is not to replicate instruments developed elsewhere, but to build the foundations and the infrastructure that serve our own objectives, so that we can harness the benefits of innovation without importing the fragilities.”
At press time, the total crypto market cap stood at $2.64 trillion.
