The European Central Bank (ECB) has warned that proposals to boost euro stablecoins could reduce bank lending and make interest rate control harder.
Bruegel, a Brussels-based think tank, suggested easing liquidity requirements for crypto issuers and giving them access to ECB funding. But central bankers, including ECB President Christine Lagarde, voiced strong opposition.
Lagarde expressed skepticism about euro stablecoins, advocating instead for tokenized commercial bank deposits. Several central bankers questioned making the ECB a lender of last resort for stablecoin firms.
Bruegel warned that stricter EU regulation compared to the U.S. could lead to "digital dollarization." ECB officials downplayed this risk, supporting EU rules to prevent runs on reserves.
Stablecoins are mainly used for cross-border payments and buying other cryptocurrencies. The TerraUSD collapse in 2022 highlights their risks.
