European Central Bank (ECB) Warns Non-EU Stablecoins Threaten Euro Stability, Urges Stricter Oversight

Christine Lagarde, President of the European Central Bank,at the European Systemic Risk Board conference, warning that stablecoins created outside the EU pose serious risks to euro stability. During the conference, Lagarde pointed out flaws in the EU’s framework that allow non-EU and EU firms to jointly produce the identical stablecoin while avoiding full regulatory monitoring.

To defend the eurozone’s financial integrity, the ECB is now urging politicians to implement equivalence requirements, tighten redemption measures, and increase international collaboration.

EU Stablecoins Regulation: Closing MiCA Gaps and Protecting Monetary Sovereignty

Stablecoin systems sponsored by non-EU suppliers benefit from inherent flexibility, which undermines the strength of MiCA. Lagarde stressed potential liquidity mismatches during times of stress, particularly when EU investors redeem stablecoins that are expected to be backed by reserves outside of EU jurisdiction. 

Without reciprocal secureguards, such scenarios may result in destabilising capital flows. EU legislators were encouraged to create stricter equivalence regimes to ensure that overseas stablecoin issuers fulfil the identical standard as EU-regulated enterprises. International regulatory convergence was recognised as essential for ensuring financial stability.

Echoing these concerns, ECB advisor Jürgen Schaaf noted that the rise of , which now dominate the market, posed a danger to the ECB’s ability to manage monetary policy. He compared the scenario to “dollarised” economies, in which reliance on foreign-issued currency reduces central bank efficacy. A sudden investor shift to stablecoins could cause serious systemic stress.

also weighed in, stating that stablecoins might threaten monetary sovereignty and public trust, particularly in places where regulatory divergence exists. Widespread adoption of foreign stablecoins, particularly in the absence of transparent reserve backing, could recreate the conditions that led to previous money market shocks.

emerges later than the rest of the world, including the U.S. and China, experimented with new digital payment methods. While EU lawmakers continue to debate how to successfully apply MiCA, the growing presence of unregulated stablecoins shows the urgent necessity for both regulatory monitoring and the rapid development of the . Lagarde emphasised the importance of a digital euro in maintaining monetary stability while complementing private advances within a public-private partnership framework.

Lagarde’s participation sends a clear message to all: without stricter equivalent standards and global cooperation, stablecoins might gradually but severely erode the euro’s dominance, and ultimately the EU’s financial sovereignty.