European Central Bank President Christine Lagarde has warned that stablecoins are moving from crypto trading tools into core parts of the global financial system, raising new risks for monetary control and stability.
The stablecoin market has grown quickly, rising from under $10 billion six years ago to more than $300 billion today. Most of this market is still tied to the U.S. dollar, with major issuers like Tether and Circle dominating supply and usage.
Stablecoins are not an efficient way to strengthen the international role of the euro, says President Christine @Lagarde.
The best solution remains deeper capital market integration through the savings and investment union and a stronger safe asset base https://t.co/Xewr8ysz9B pic.twitter.com/vPYIUw1R00
— European Central Bank (@ecb) May 8, 2026
Stablecoins shift from trading tools to payment infrastructure
Lagarde said stablecoins are no longer limited to crypto trading. They are now being used for payments and settlement in tokenized markets, where digital assets move instantly on blockchain systems.
This change matters because stablecoins are starting to act like digital cash. They help move money faster and across borders, but central banks do not issue them. That raises concerns for regulators, since private companies now play a bigger role in how money flows.
The ECB also warned that if dollar-based stablecoins continue to grow, they could increase reliance on the U.S. financial system, even in global digital markets. This could, over time, weaken Europe’s control over its own monetary system.
Europe focuses on central bank-controlled digital systems
Instead of pushing euro stablecoins to compete directly, Europe is focusing on building its own digital payment infrastructure. The goal is to ensure that, even in blockchain-based markets, settlement still occurs using central bank money.
Projects like Pontes and Appia are designed to link tokenized financial markets directly to central bank systems. This allows digital assets to be traded on blockchain networks while still being settled in safe, regulated money.
The ECB’s approach shows a clear split in global strategy. The U.S. is leaning toward private stablecoins playing a bigger role in payments. Europe is taking a more controlled path, where innovation is allowed, but money creation and settlement stay under central bank oversight.
Can the euro compete in a stablecoin-dominated financial system?
Stablecoins are moving from a niche crypto tool into a core part of global finance, but the European Central Bank warns this move could weaken Europe’s monetary control. With US dollar-backed stablecoins making up about 99% of the market, they are increasingly used for payments, settlements, and even savings, raising concerns that deposits could move away from eurozone banks and into private digital assets.
The ECB’s deeper concern is that, if stablecoins become widely used in Europe, they could reduce the euro’s influence and strengthen US financial dominance, since issuers back tokens with assets like US Treasuries.
While Europe sees risks to financial stability and monetary sovereignty, it also views this disruption as an opportunity to accelerate the development of euro-based stablecoins, a digital euro, and blockchain-based financial infrastructure to stay competitive in the new digital money system.
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