European Central Bank (ECB) President Christine Lagarde argued at the Banking Forum held in Madrid that euro-pegged stablecoins issued by the private sector are not necessary for Europe. Despite the dominant position of US dollar-based stablecoins in the market, Lagarde emphasized that Europe should prioritize the development of tokenized payment infrastructure backed by central bank money, rather than copying the US model.
Euro stablecoin debate and current market landscape
The stablecoin market has grown rapidly in recent years. Today, stablecoins backed by the US dollar represent about 98 percent of this market, with companies such as Tether and Circle leading the field. While Lagarde acknowledged the technological advantages stablecoins offer, she pointed out that similar benefits could be achieved within central bank-backed infrastructures and warned of the potential risks to financial stability. Meanwhile, debate over the digitization of Europe’s currency has accelerated.
Market volume has reportedly surged from $10 billion to $310 billion over the past six years. The fact that a vast majority of liquidity is concentrated in a single currency and in just two private firms—Tether and Circle—poses a notable threat to European financial stability.
Qivalis consortium’s move and Lagarde’s warnings
Amid these developments, the Qivalis consortium, which includes 12 leading European banks such as ING, BBVA, BNP Paribas, Danske Bank, and UniCredit, has announced a new privately issued euro-based stablecoin. The stablecoin is designed as a response to the risks of further dollarization impacting Europe. Jan-Oliver Sell, CEO of Qivalis, stressed that without a euro with sufficient liquidity available on blockchain, the US dollar will remain the sole viable alternative for digital transactions in Europe.
“If there is no strong euro on-chain, the only option will be the US dollar. This represents a real risk for Europe’s financial and digital sovereignty,” warned Qivalis CEO Jan-Oliver Sell.
Lagarde, for her part, underlined that stablecoins could inflict significant damage on the financial system during periods of instability. Citing the temporary de-pegging of Circle’s USDC stablecoin during last year’s collapse of Silicon Valley Bank, she suggested that widespread use of major stablecoins could give rise to new risk cycles for the broader market.
Lagarde further noted that if stablecoin-issuing companies operate outside the banking sector, mass withdrawals could trigger turmoil in core asset markets.
Europe’s roadmap: Digital euro and regulation
President Lagarde stated that the proliferation of euro-based stablecoins in Europe is essential to preserve the continent’s monetary autonomy. She also emphasized that Europe must accelerate the development of its own digital infrastructure to remain influential in a rapidly digitizing world.
“Europe must promote its euro-based stablecoins; otherwise, growing dollarization and the loss of monetary sovereignty in the digital realm are inevitable,” affirmed Christine Lagarde.
The ECB president explained that a public infrastructure would enable both stablecoins and other token-like financial instruments to operate under the guarantee of the central bank. This would help safeguard Europe’s financial stability and maintain its regulatory authority.
Late last year, the ECB announced a 2029 target for rolling out a digital euro, with preparations and pilot phases potentially beginning in 2027. Legal frameworks necessary for the launch are expected to be finalized by 2026.
