European Central Bank refuses to ease stablecoin regulations! Concerns over driving up bank funding costs and weakening lending capacity

Author: Max, Crypto City ECB Opposes Easing Stablecoin Regulations The European Central Bank recently publicly opposed easing euro stablecoin regulatory rules at an informal meeting of EU finance ministers and central bank officials held in Nicosia, Cyprus. According to Reuters, Brussels-based think tank Bruegel submitted a policy proposal hoping the EU would lower liquidity requirements for stablecoin issuers, and even allow some operators to obtain ECB funding support, to help the euro stablecoin market counter the dominance of USD stablecoins. However, ECB President Christine Lagarde and several central bank officials expressed strong concerns about this. They believe that if large amounts of funds flow from bank deposits to stablecoin issuers, it will raise banks' funding costs, weaken banks' lending capacity, and simultaneously reduce the ECB's control over interest rates and monetary policy. Several officials also opposed making the ECB the "lender of last resort" for stablecoin companies. Currently, such support mechanisms are only provided to the regulated banking system, and there are internal concerns within the central bank that once stablecoins are brought under equivalent protection, it could expand risks within the financial system. Lagarde Pushes for Tokenized Deposits and Digital Euro Lagarde has recently publicly questioned the necessity of euro stablecoins on multiple occasions. She believes that while euro stablecoins may increase demand for euro assets, the associated risks outweigh the potential benefits, including financial stability, redemption pressure, and reduced monetary policy transmission capacity. Compared to private stablecoins, the ECB is more inclined to promote "tokenized bank deposits" and a digital euro framework. Lagarde has recently mentioned the ECB's Pontes and Appia projects multiple times, hoping to establish tokenized financial infrastructure backed by central bank money. The ECB currently still plans to launch the digital euro in 2029, as a payment tool guaranteed by the central bank and operated by private financial institutions. However, the European banking industry remains reserved on this, worried that the public will transfer deposits into digital euro wallets, further impacting the bank deposit base. To reduce the impact, the digital euro proposal currently under discussion in the EU is expected to set a personal holding limit of approximately 3,000 euros, hoping to avoid large-scale capital outflows from the banking system. Europe Concerned About "Digital Dollarization" Risk Bruegel warned in its report that compared to the U.S. GENIUS Act, the EU's MiCA regulations have stricter requirements for stablecoins, which may cause stablecoin issuance and trading activities to flow overseas, further accelerating "digital dollarization." The current global stablecoin market is approximately $300 billion in size, growing by about one-third compared to the previous year. However, euro stablecoins account for only 0.3% of the total supply. The largest euro stablecoin currently is EURC issued by Circle, but its global ranking is outside the top 20. It is worth noting that although the size of euro stablecoins is small, the stablecoin transaction volume in the European region in Q4 2025 already accounted for 38% of global transaction volume, indicating that demand for on-chain payments and stablecoins in the European market is not low. However, several ECB officials downplayed the "digital dollarization" risk at the meeting, with some officials even advocating for limiting large-scale stablecoin redemptions within Europe to prevent reserve assets from facing runs. European Banks and Private Institutions Accelerate Deployment Although regulatory attitudes remain conservative, European private financial institutions have not stopped advancing euro stablecoin plans. The Qivalis alliance, composed of European banks, has now expanded to include 37 banks in 15 countries, including major financial institutions such as BNP Paribas, ING, UniCredit, Rabobank, and Nordea. Qivalis plans to launch a MiCA-compliant euro stablecoin in the second half of this year, attempting to establish an on-chain payment system led by European banks. Institutions such as Société Générale have also already begun testing related products. On the other hand, Europe has continued to promote the concept of "payment sovereignty" in recent years, hoping to reduce dependence on U.S. payment companies such as Visa, Mastercard, PayPal, and Apple Pay. Currently, U.S. companies still handle nearly two-thirds of card payment transactions in the eurozone. The ECB believes that the digital euro will become an important tool for unifying European payment infrastructure, but market observers worry that the pace of European regulation and policy advancement may not keep up with the development pace of private payments and blockchain technology. (The above content is excerpted and reproduced with authorization from partner Crypto City, original link)