The European Central Bank (ECB) has voiced its concerns about proposals to increase the use of euro stablecoins, citing potential risks to financial stability. The ECB is worried that these moves could lead to disintermediation, making it harder for banks to lend and raising funding costs. This would undermine an economically vital sector and the central bank's ability to engineer interest rates.
The proposals in question aim to ease liquidity requirements for crypto issuers and potentially give them access to ECB funding. However, this idea met immediate resistance from central bankers, including ECB President Christine Lagarde. They argue that such moves would make bank deposits more fickle, weakening the sector's stability.