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, expressed strong caution against the spread of US-style stablecoins, deeming private stablecoins an unsuitable means for the future of the Euro. At the Roda de Berà Forum, Lagarde labeled stablecoins as a "private trap" and stated that the Euro's international role cannot be entrusted to private payment assets that could destabilize the European economy.

According to the cryptocurrency specialized media U.Today on May 8, Lagarde chose a path of strengthening financial sovereignty, even as global markets were focusing on 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 the line, stating that they are not sufficient as a means to enhance the international status of the Euro.

The key risk identified by the European Central Bank is the trend of stablecoins transforming into income-generating assets. The ECB believes that if token holders begin to receive returns indirectly linked to US Treasury bonds, as seen in the cases of Tether and Circle, it would lead to capital movements that the European Central Bank cannot control. Lagarde stated, "Stablecoins are not an efficient 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 European Central Bank views this incident as key evidence demonstrating the structural vulnerabilities of private stablecoins. Lagarde's assessment is that stablecoins inherently carry the risk of bank runs, as they are private debt. The perspective was also presented that in a European economic structure that 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 is a plan to process tokenized asset settlements with "central bank money" rather than private stablecoins by 2028.

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

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