Lagarde warns euro stablecoins threaten financial stability

ECB President Christine Lagarde spoke on Friday at the Banco de España LatAm Economic Forum in Madrid and argued that euro-denominated stablecoins present risks to financial stability and to the transmission of monetary policy. Her remarks contrasted with a more supportive view from Bundesbank President Joachim Nagel.

Lagarde separated the monetary function of stablecoins-extending a reserve currency’s reach-from their technological function. She said the monetary role raises risks that outweigh potential gains for the euro’s international use, and called the case for promoting euro-denominated stablecoins “far weaker than it appears.” She added that the tech aspects could be provided through public infrastructure anchored in central bank money rather than market-issued tokens.

She listed specific trade-offs: stablecoins can trigger runs and de-pegging events similar to the 2023 episode involving a U.S. bank and a linked token; they can lead to deposit substitution that would shrink the bank lending channel in Europe’s bank-focused system; and they can increase fragmentation and risks to monetary sovereignty when tied to foreign currencies. Lagarde referenced an ECB working paper from March that found broad stablecoin adoption would pose major risks to euro-area banks and to the central bank’s ability to conduct policy.

Lagarde pointed to the ECB’s tokenization projects, Pontes and Appia, which focus on wholesale settlement, as appropriate infrastructure for token-based finance. She also urged deeper capital markets integration through measures such as the savings and investments union to support digital finance without expanding exposure to private stablecoins.

Parts of the European banking and payments industry are preparing MiCAR-regulated euro stablecoins. Twelve major European banks have formed a Netherlands-based joint venture called Qivalis and aim for a commercial launch in the second half of 2026. Market data show U.S. dollar–backed stablecoins make up the vast majority of supply, while non-dollar tokens remain a small share.

Lagarde’s comments follow earlier warnings she made about stablecoins, including privacy concerns raised in 2023 and calls in 2025 for stricter oversight of non-EU stablecoin issuers to limit exposure of EU reserves to runs. Her speech restated the ECB’s longstanding preference for central-bank–anchored solutions over a proliferation of privately issued euro tokens.