ECB Warns Easier Euro Stablecoin Rules Could Raise Banks’ Costs

The European Central Bank rejected a proposal at a two-day informal meeting of EU finance ministers and central bank governors in Nicosia, Cyprus in June to relax liquidity requirements for euro stablecoin issuers and to allow those firms to access ECB liquidity. ECB President Christine Lagarde and several central bankers argued extending central bank backstop privileges beyond supervised banks would pose risks to financial stability.

The proposal came from a policy brief by three economists who said lighter rules and central bank access would help grow a euro stablecoin market that remains small compared with dollar-denominated tokens. They warned that stricter EU rules than those in the United States could push issuance and trading offshore and accelerate “digital dollarization.”

ECB officials said permitting stablecoin issuers to withdraw large sums from bank deposits would raise banks’ funding costs and reduce their capacity to lend to households and businesses. Several central bankers objected to the idea of the ECB serving as a backstop for stablecoin firms, a role they said should remain limited to supervised banks. Finance ministers were reported to be split on the proposal.

Officials also discussed operational safeguards. Some central bankers recommended imposing redemption limits on stablecoins, regardless of where they are issued, to lower the risk of reserve runs if large numbers of foreign holders cashed out at once. Those concerns reflect how private-token designs can interact with bank funding models under Europe’s regulatory framework.

The European Commission is reviewing the Markets in Crypto-Assets Regulation (MiCA), in force since 2024, which requires stablecoin issuers to hold a large share of reserves in bank deposits and other liquid assets. By contrast, a U.S. law enacted in July 2025 sets lighter requirements for regulated dollar tokens. Supporters of the U.S. approach say lighter rules help secure dollar dominance through regulated tokens; critics say looser standards could shift activity outside European supervision.

Private sector projects are moving ahead while the regulatory debate continues. The Qivalis consortium, based in Amsterdam and seeking authorization from the Dutch central bank, has grown to 37 banks across 15 countries and plans to launch a MiCA-compliant euro stablecoin in the second half of the year. Founding members include BNP Paribas, ING, UniCredit, CaixaBank and Danske Bank; recent participants include ABN Amro, Rabobank, Nordea and Intesa Sanpaolo. Smaller bank-led projects, including work by Societe Generale, are also under way.

Market data cited by policymakers show global stablecoin supply rose by roughly a third in 2025 to about $300 billion, while euro-pegged tokens represented about 0.3% of that total, with Circle’s EURC the largest euro token. Activity tied to Europe-based stablecoins accounted for about 38% of global transaction volume in the final quarter of 2025.

The ECB is also continuing work on a retail digital euro and aims to have a retail central bank digital currency available by 2029; finance ministers at the Nicosia meeting reaffirmed that timeline. Lagarde has argued that any benefit a euro-denominated stablecoin might bring to the currency’s international standing is outweighed by risks to monetary policy transmission and financial stability, and she has pointed to tokenized commercial bank deposits and the ECB’s Pontes and Appia wholesale settlement projects as preferred on-chain infrastructure.

Banks have expressed concern that retail adoption of a central bank digital currency or widespread use of private stablecoins could draw deposits out of the banking system. The June discussions in Nicosia made clear European authorities remain divided on how to balance market competitiveness with safeguards for banks and monetary policy.