ECB President Christine Lagarde defends the digital euro as the only response to the growing dominance of dollar-pegged stablecoins.
ECB President Christine Lagarde is rallying support for the digital euro as the eurozone’s primary tool to counter the growing influence of dollar-pegged stablecoins in global payments, dismissing euro-denominated stablecoins as an inadequate alternative. Dollar stablecoins dominate the market with a capitalisation of approximately 317 billion dollars, while euro stablecoins fall short of one billion dollars in market capitalisation.
Speaking at the Banco de España LatAm Economic Forum in May, Lagarde described the case for euro-denominated stablecoins as “far weaker than it appears.” She highlighted their vulnerability during periods of market stress and the risk they pose to the ECB’s ability to transmit interest rate policy to the real economy. “If we want to strengthen the international appeal of the euro, stablecoins are not an efficient way to do so,” she told the audience in Spain.
ECB Executive Board member Isabel Schnabel reinforced this position on 1 June, at a Bank of Korea conference in Seoul, drawing a parallel between modern stablecoins and the money market funds of the 1970s that drained deposits from banks. Since almost all stablecoins in circulation are pegged to the dollar, Schnabel warned that their widespread adoption would strengthen American monetary influence. “Dollar dominance would be reinforced – not necessarily because of stronger economic fundamentals, but through network effects, scale, and first-mover advantages,” she said. Schnabel also cautioned that persistent dollar stablecoin dominance is not in Europe’s interest, as it could limit the euro’s role in tokenised finance and, by extension, in the international monetary system. On this issue, UniCredit has also recently warned that Europe lacks the tools to manage a banking crisis caused by stablecoins.
The ECB’s preferred solution, the digital euro, is still far from launch. A pilot programme is not expected before the second half of 2027, with a 12-month trial involving a limited number of banks and merchants. Even in the most optimistic scenario, the ECB does not expect to issue a digital euro before 2029. The European Parliament voted in February to approve the digital euro regulatory framework, with 420 MEPs in favour of an amendment supporting its online and offline functionality. Lagarde stated that the digital euro would operate on European infrastructure, reducing dependence on foreign payment providers such as Visa and Mastercard. On the question of the digital euro and its progress, Atlas21 has already examined the milestones of the European project in depth.
Ten major European banks, including BNP Paribas, ING and UniCredit, have formed a consortium called Qivalis to launch a euro-pegged stablecoin, applying for an electronic money institution licence from the Dutch Central Bank. Transaction volumes in euro stablecoins grew from 69 million dollars in January 2025 to 777 million dollars in March 2026, according to TRM Labs. Circle’s EURC holds over 50% of the euro stablecoin market, with a supply of approximately 543 million dollars, after securing an early French electronic money institution licence under MiCA, the European regulatory framework for crypto assets.
