The European Central Bank (ECB) is taking a cautious approach to the growing popularity of stablecoins, which are digital currencies pegged to a traditional currency like the US dollar. The ECB is concerned that if Europe adopts a model where stablecoins are issued by foreign private companies, it will lose control over the euro and risk being locked into a digital dollarization process.
According to Lagarde, the dominance of Tether and Circle, two of the largest stablecoin issuers, could weaken European monetary sovereignty. She emphasizes that the ECB does not reject blockchain technology but rather refuses to import a model designed elsewhere.
The ECB is working on building its own tokenized monetary infrastructure, which will allow for digital settlements without relying on foreign-issued stablecoins. This approach is seen as slower and more political than simply launching a stablecoin, but it aims to avoid Europe being locked into a system where the dollar becomes the default currency for tokenized markets.