ECB Chief Lagarde Casts Doubts on Stablecoin's Ability to Boost Euro

European Central Bank President Christine Lagarde has expressed doubts about the potential of stablecoins to strengthen the global role of the euro.

In a speech at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, Lagarde highlighted that the benefits attributed to stablecoins are often based on two distinct functions: monetary and technological. She argued that these functions are systematically conflated in the current debate.

Lagarde pointed out that while euro-denominated stablecoins operating under the European Union's Markets in Crypto-Assets Regulation (MiCA) could generate additional global demand for euro-area safe assets, this comes with significant trade-offs, including financial stability risks such as fund runs and reserve fragility. She also noted that other forms of tokenized money, including commercial bank deposits or central bank money, could perform the same technological function within distributed ledger systems.

Lagarde emphasized that Europe should focus on building tokenized financial infrastructure anchored by central bank money, rather than promoting euro-denominated stablecoins as a response to US dollar-backed stablecoins. She mentioned the EU's Pontes project and Appia roadmap as examples of initiatives aimed at facilitating wholesale settlement in central bank money and creating a fully interoperable European tokenized financial ecosystem.