ECB rejects proposal to extend euro stablecoin measurement as too dangerous

• The ECB rejected proposals to ease liquidity guidelines and create extra euro stablecoins, saying they had been too dangerous.
• The ECB argues that stablecoins destabilize financial institution deposits and weaken its means to regulate rates of interest.
• This raises issues about digital dollarization and will increase the EU’s competitiveness within the world stablecoin market.

On Might 22, 2026, the European Central Financial institution (ECB) rejected a proposal from the Bruegel assume tank to calm down liquidity guidelines, give stablecoin issuers entry to ECB funds, and designate the ECB as a lender of final resort.

ECB President Christine Lagarde and different officers cited dangers similar to financial institution deposit flight, greater funding prices, diminished lending capability and a reserve run that would undermine financial coverage.

ECB rejects proposal to ease liquidity guidelines

The ECB rejected the proposal, drawn up by Brussels-based assume tank Bruegel by Lucrezia Reichlin, Beau Sangers and Jeromin Zettelmayer, and submitted to European Union finance ministers at a personal assembly in Nicosia, Cyprus, the individuals mentioned. The proposal was geared toward stress-free guidelines and supporting euro stablecoin issuers, however was rejected as too dangerous for monetary stability and financial coverage.

The ECB has reiterated its choice for tokenized industrial financial institution deposits as an alternative of backing non-public euro stablecoins, which Lagarde mentioned might mix “the safety of conventional accounts with the pace and programmability of distributed ledger expertise.” The rejection comes because the EU is reviewing its Cryptocurrency Market Regulation (MiCAR) and the ECB is engaged on a digital euro, geared toward launching in 2029.

Associated: ECB units circumstances for tokenization in European capital markets

Why the ECB rejected the Euro stablecoin proposal

ECB President Christine Lagarde and different central financial institution officers have argued that the broader adoption of euro stablecoins will end result within the switch of buyer funds from industrial banks to stablecoin issuers. Financial institution deposits would then develop into “extra capricious” and a much less secure supply of funding for banks. The ECB warned that the adjustments might speed up disintermediation, increase banks’ funding prices and scale back their means to lend to the economic system.

Officers additionally expressed concern that the adjustments would weaken the banking sector as an entire and make it more durable for central banks to regulate rates of interest. A number of central bankers particularly questioned the thought of ​​increasing the lender of final resort’s features, that are presently restricted to the regulated banking sector.

What’s subsequent for euro stablecoins and EU crypto coverage?

The ECB’s decisive rejection of Brueghel’s proposal to ease liquidity laws and grant central financial institution entry to stablecoin issuers suggests {that a} strict regulatory stance will proceed. Because the MiCA evaluate progresses, no significant easing is predicted, and euro stablecoin progress is more likely to stay subdued into 2026-2027.

In the meantime, as a result of EU’s strict guidelines, euro-denominated stablecoins stay marginal at simply 0.3% of world provide in a market value over $323 billion, whereas stablecoins pegged to the US greenback account for over 99.7% of complete provide. Regardless of efforts similar to Qivalis, backed by 37 banks in 15 international locations, and efforts by Société Générale to launch in 2026, progress stays subdued and sluggish.

Due to this fact, because the ECB prioritizes safeguards in opposition to financial institution deposit outflows and redemption dangers, the US momentum underneath the 2025 GENIUS Act will strengthen the dominance of greenback stablecoins and heighten issues about digital dollarization throughout euro space funds.

Associated: MiCA report: Euro stablecoins are secure however much less aggressive