European Central Bank Rejects Euro Stablecoin Rule Easing, Warns It Would Destabilize Banks

The European Central Bank rejected proposals to ease euro stablecoin rules at an informal meeting in Nicosia, Cyprus on May 22, 2026, with ECB officials arguing that relaxing liquidity and reserve requirements would destabilize the banking system and complicate monetary policy.

At the same meeting, ECB President Christine Lagarde and other central bankers warned that stablecoin issuers pulling deposits out of European banks at scale would raise lenders' funding costs and curb their capacity to extend credit, Reuters reported.

bloomingbit

Crypto Briefing said the rejection came as the broader stablecoin market sat at roughly $300 billion in total value, while euro stablecoins including Circle’s EURC accounted for just 0.3% of global supply.

Crypto Briefing also tied the ECB’s stance to the idea that if stablecoin issuers do not have to park substantial reserves with traditional banks, money flows out of the banking system and weakens the ECB’s ability to transmit interest-rate decisions.

The Block added that several officials balked at turning the ECB into a backstop for stablecoin firms, a role traditionally limited to supervised banks, according to Reuters.

Crypto Briefing said Lagarde had already telegraphed the ECB’s thinking in a May 8 speech, where she highlighted the risk of “runs” on multi-issuer stablecoin setups and expressed a preference for DLT-enabled tokenized bank deposits over private stablecoin solutions.

At the Nicosia meeting, Crypto Briefing described the ECB’s position as formalizing that preference into a policy stance, while the proposals it shot down were inspired by recommendations from the Bruegel think tank.

bloomingbit

The Block, citing Reuters, reported that finance ministers were split on the proposal, and it said Lagarde publicly argued earlier this month that the case for euro-denominated stablecoins is “far weaker than it appears.”

Cointelegraph, also citing Reuters, said Lagarde warned that stablecoin issuance makes bank deposits less stable by transferring buyers’ funds to issuers’ accounts, and that at scale policymakers fear it accelerates disintermediation and raises bank funding costs.

CryptoRank added that the ECB warned of deposit flight, higher funding costs and potential reserve runs, raising digital dollarisation concerns and likely hurting EU competitiveness and adoption of euro stablecoins.

The ECB’s pushback landed as the EU reviews its Markets in Crypto-Assets Regulation (MiCA), which has been in force since 2024 and requires stablecoin issuers to hold 30% of their reserves with banks, with larger issuers required to hold 60%.

Crypto Briefing said the Bruegel proposal would have loosened those requirements, but the ECB said no, while The Block said the political fight is playing out as private issuers race to fill the euro-denominated gap.

The Block reported that the Qivalis consortium, an Amsterdam-based joint venture pursuing authorization from De Nederlandsche Bank, has grown to 37 banks across 15 countries and plans to launch a MiCA-compliant euro stablecoin in the second half of this year.

Crypto Briefing said the ECB is not ignoring digital currencies entirely and is developing a digital euro, a central bank digital currency anticipated for launch in 2029, as an answer to the stablecoin boom controlled by private issuers.

In parallel, Crypto Briefing said the ECB’s preference is for tokenized bank deposits and pointed to the ECB’s Pontes and Appia wholesale settlement projects as the right onchain plumbing for Europe, even as the stablecoin debate continues to center on risks to financial stability and monetary-policy transmission.