Schnabel urges digital euro to curb stablecoin risks

Isabel Schnabel, a member of the European Central Bank's executive board, argued in recent remarks that a digital euro is needed to curb risks from privately issued stablecoins and to protect the euro and the payments system.

She pointed to risks if payment activity shifts to stablecoins: central banks could lose visibility over money flows, transmission of monetary policy might weaken, and traditional banks could face funding pressures.

Schnabel highlighted operational and cross-border concerns. Stablecoins moving across jurisdictions can complicate supervision, affect consumer protection and anti-money-laundering controls, and challenge the resilience of payment infrastructure. A digital euro issued by the Eurosystem would fall under public oversight and the single currency's regulatory framework.

The board member called for continued work on design features and legal frameworks. Key choices include how to protect user privacy while allowing law enforcement access, whether to enable offline use, and whether to set limits or tiers on retail holdings to prevent large shifts out of bank deposits. Technical, legal and operational questions remain, and Schnabel recommended stakeholder consultation and further analysis.

The Eurosystem has carried out research and technical experiments on a digital euro, exploring prototypes and the legal foundations for issuance and distribution. Central banks worldwide are studying or piloting retail central bank digital currencies.

Schnabel stressed that a digital euro would not replace cash but would provide another option for consumers and businesses to hold central bank money in digital form, with the aim of keeping digital payments under public oversight while supporting secure and efficient payments.