European Central Bank Criticizes US-Style Stablecoins... "Protect Financial Sovereignty"

▲ European Union (EU), Tether (USDT), USDC, Stablecoin Payment/AI-generated image

Christine Lagarde, President of the European Central Bank (ECB), has expressed strong caution regarding the US-style stablecoin proliferation model, defining private stablecoins as an unsuitable means for the future of the euro. At the Roda de Berà forum, Lagarde identified stablecoins as a "private trap" and stated that the international role of the euro cannot be entrusted to private payment assets that could destabilize Europe's economic stability.

According to the cryptocurrency media outlet U.Today on May 8, Lagarde chose to strengthen financial sovereignty, even as global markets were paying attention to signals of digital asset easing from high-ranking European officials. Lagarde acknowledged that stablecoins have solved the volatility problem of cryptocurrencies and have gained a dominant position in the DeFi payment layer. However, she drew a line, stating they are not sufficient as a means to enhance the international status of the euro.

The key risk identified by the ECB is the trend of stablecoins transforming into yield-bearing assets. The ECB believes that if token holders start receiving returns indirectly linked to US Treasury bonds, as seen in the cases of Tether and Circle, it would lead to capital movements beyond the ECB's control. Lagarde stated, "Stablecoins are not an effective way to strengthen the international role of the euro."

Lagarde also brought up the case where USDC lost its dollar peg during the SVB collapse. The ECB views this incident as key evidence demonstrating the structural vulnerabilities of private stablecoins. Lagarde's assessment is that since stablecoins are private debt, they inherently carry the risk of a bank run. The view was also presented that in a European economic structure, which operates primarily on bank loans, it is difficult to accept the risk of privately issued payment assets spreading throughout the financial system.

Instead of handing over the market to private companies, the European Central Bank has decided to build its own digital financial infrastructure. Project Pontes is an attempt to connect fragmented European financial infrastructure into a single network. The Appia roadmap outlines a plan to process tokenized asset payments with "central bank money" rather than private stablecoins by 2028.

While Lagarde acknowledged that Distributed Ledger Technology (DLT) offers advantages such as immediate settlement and reduced intermediaries, she maintained that the payment asset itself must be the euro within a regulatory framework. The ECB clearly stated its stance to not import system instability, even if the adoption rate of the digital euro is slower than that of dollar-based stablecoins.

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