Christine Lagarde Warns Against Euro-Denominated Stablecoins at Banco de España LatAm Forum

European Central Bank President Christine Lagarde used the Banco de España LatAm Economic Forum in Spain to argue that Europe should not promote euro-denominated stablecoins as a direct response to US dollar dominance.

“ECB's Lagarde’s digital euro warning: Why Europe shouldn’t just copy the U”

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Lagarde said, "The case for promoting euro-denominated stablecoins is far weaker than it appears," and she pushed instead for tokenized settlement infrastructure anchored by central bank money rather than copying the US stablecoin model.

@coindesk

In the same remarks, she warned stablecoins can create financial stability risks, weaken monetary policy transmission, and increase pressure on banks if deposits migrate into non bank instruments.

Lagarde also framed stablecoins as the default cash leg for tokenized finance because they allow transactions to settle natively on blockchains, while arguing private stablecoins remain fragile because they can lose their peg during periods of stress.

She pointed to the Eurosystem’s plans to launch wholesale settlement through Pontes in September and to build a fully interoperable European tokenized financial system by 2028.

Lagarde’s argument was tied to the scale and concentration of the stablecoin market, with Crypto Briefing saying stablecoins have grown from less than $10 billion six years ago to more than $300 billion today.

Crypto Briefing added that the market is overwhelmingly denominated in US dollars and that nearly 90% is controlled by Tether and Circle.

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In a separate account, CoinDesk reported Lagarde’s warning against privately-issued euro-pegged stablecoins even in a market described as "98% dominated by dollar-pegged tokens."

CoinDesk also quoted Lagarde referencing the March 2023 collapse of Silicon Valley Bank and Circle’s disclosure that $3.3 billion of its USDC reserves were at the bank, which caused a brief de-peg of its stablecoin.

CoinDesk then included Lagarde’s warning that "At scale, such dynamics can transmit stress to the underlying asset markets" as part of the case for building central-bank-anchored infrastructure instead of replicating the US stablecoin model.

While Lagarde pressed back on euro stablecoins, the Irish Times described the digital euro as "digital cash" and said the anchor of the currency is central bank money.

“European Central Bank (ECB) President Christine Lagarde argued against the need for privately-issued euro-pegged stablecoins, even in the face of a market which is 98% dominated by dollar-pegged tokens”

CoinDesk

The Irish Times also said consumers across the EU would get a virtual wallet for instant payments and transfers to anyone in the euro zone, and it stated that the digital euro would be backed directly by the ECB and free from the control of commercial banks, US credit card companies and big tech giants.

In parallel, Milano Finanza reported that the ECB has confirmed it is evaluating structures "sia centralizzate che decentralizzate" and that some reports suggest the currency could be launched directly on a public blockchain.

Milano Finanza said the ECB aims to present a prototype by 2025, while the Irish Times said EU leaders agreed in March to put the necessary legislation in place for the digital euro to come into effect by the end of this year.

Together, the two tracks of policy described in the sources place the emphasis on ECB-led infrastructure—Pontes and Appia in the stablecoin debate, and a digital euro wallet in the consumer-facing plan—rather than a euro stablecoin ecosystem as the primary counterweight to dollar-backed tokens.