The European Central Bank pushed back against proposals to loosen rules for euro stablecoins, warning EU finance ministers that the move could hurt bank lending and make interest-rate control harder.
The warning came at an informal gathering of EU finance policymakers in Nicosia, Cyprus, Reuters reported on Friday, May 22, citing three people familiar with the matter.
The proposal came from Bruegel, a Brussels-based economic think tank, which argued that Europe risks falling further behind in a stablecoin market dominated by dollar-backed tokens like Tether and Circle.
- Stablecoin supply grew to around $313 billion, according to Artemis data cited by Bruegel, while euro-denominated stablecoins account for only 0.3% of total supply.
Stablecoins by market capitalization. Source: Artemis
- Circle's EURC is the largest euro stablecoin, with a market capitalization of more than $442 million. But it remains tiny next to dollar-backed tokens such as Circle's USDC, which has a market capitalization of more than $78.3 billion.
Bruegel's paper suggested easing liquidity requirements for euro stablecoin issuers and potentially giving them access to the ECB's balance sheet.
The think tank also warned that strict EU rules could push stablecoin activity outside the bloc and increase "digital dollarisation."
Why the ECB is worried
But ECB officials worry that stablecoins could pull money out of bank deposits. Central bankers at the meeting also reportedly questioned the idea of turning the ECB into a backstop for stablecoin companies.
It is unclear from the report whether Bruegel's proposal had support from any specific EU government, and finance ministers at the meeting were described as having mixed views.
- ECB President Christine Lagarde has already shown skepticism toward euro stablecoins. In a May 8 speech, she pointed instead to tokenized commercial bank deposits, a more bank-centered version of digital money that could move on blockchain-style systems while still sitting inside regulated banks.