FRANKFURT, May 8 - European Central Bank President Christine Lagarde said on Friday she is sceptical about the need for stablecoins pegged to the euro, arguing they could undermine the central bank's work and potentially deepen financial turbulence.
Lagarde pointed to a wave of initiatives by a number of large euro zone banks, including Societe Generale, that are developing crypto assets tied to the euro. Those projects aim to gain a foothold in a market currently dominated by the U.S. dollar and to create instruments that some market participants hope will boost the single currency's international standing.
Despite those initiatives, Lagarde described the case for euro-denominated stablecoins as "far weaker than it appears." She cited their vulnerability to runs in periods of market stress and warned that they would dilute the ECB's capacity to transmit interest-rate policy across the entire economy.
Speaking to an audience in Spain, Lagarde said the trade-offs associated with issuing or widely adopting euro stablecoins outweighed any short-term improvements in financing conditions or gains in international reach. "These trade-offs... outweigh the short-term gains in financing conditions and international reach that euro-denominated stablecoins might provide," she said.
She also addressed the question of whether stablecoins could serve as an efficient tool to raise the euro's global appeal. "If we want to strengthen the international appeal of the euro, stablecoins are not an efficient way of doing so," Lagarde said.
The comments underscore a tension between private-sector experiments with digital, currency-pegged tokens and the ECB's mandate to ensure effective monetary policy transmission and financial stability. Banks pursuing euro-linked crypto assets see a potential path to broaden the euro's footprint, but the ECB president emphasised the potential costs those instruments could impose on stability and on the central bank's policy toolkit.
Context and implications
While several large banks are exploring euro-pegged crypto instruments, Lagarde's remarks make clear the ECB views the benefits as limited when balanced against the risks. The central concern is that stablecoins can be prone to runs during market turmoil and could fragment the channels through which the ECB reaches households and businesses with its interest-rate decisions.