The European Central Bank has rejected a proposal to relax liquidity rules for euro stablecoin issuers and give them access to central bank funding, according to people familiar with confidential discussions.
The decision, taken after a policy pitch from Brussels-based think tank Bruegel, underscores the ECB’s resistance to treating stablecoin firms like regulated banks and signals a tougher operating environment for euro-pegged digital tokens.
Bruegel proposal blocked in Nicosia talks
At a meeting of EU finance ministers and central bank governors in Nicosia, Cyprus, Bruegel researchers Lucrezia Reichlin, Bo Sangers and Jeromin Zettelmeyer urged policymakers to:
- ease liquidity requirements for euro stablecoin issuers
- create a central bank liquidity backstop for those issuers
Their argument: a more supportive regime could help build a euro-denominated stablecoin market currently dwarfed by dollar-backed tokens and prevent Europe from falling further behind in digital finance.
President Christine Lagarde and several senior ECB officials opposed the plan. Sources say they warned that:
- large deposit outflows from commercial banks into stablecoin issuers could push up banks’ funding costs
- higher funding costs could limit banks’ ability to provide credit to the real economy
- turning the ECB into a funding provider for stablecoin firms would go beyond its traditional role, which focuses on supervised banks and other regulated intermediaries
Finance ministers were divided, highlighting ongoing political and regulatory uncertainty around the role of fiat-linked digital tokens in Europe’s financial system.
Financial stability and mandate at the core of ECB concerns
Officials who pushed back on the Bruegel paper argued that extending central bank support to stablecoin issuers could:
- blur the line between regulated deposit-taking institutions and non-bank digital asset firms
- complicate monetary policy transmission if large volumes of deposits migrate into tokens
- introduce new systemic risks if a run on a major stablecoin issuer forced the ECB to step in as a de facto lender of last resort
Some central bankers instead floated the idea of redemption limits on stablecoins, regardless of where they are issued, to curb the risk of sudden, large-scale capital withdrawals from banks or the euro area.
Lagarde has repeatedly said that the benefits of euro-based stablecoins do not offset their potential risks. In a speech in Madrid earlier this month, she pointed to tokenized commercial bank deposits and internal settlement projects, known as Pontes and Appia, as safer ways to deploy distributed-ledger technology within the existing banking perimeter.
Competitiveness clash: Europe vs the United States
Bruegel framed its proposal as a competitiveness issue. The authors warned that:
- stricter European standards relative to the United States’ 2025 GENIUS Act could drive stablecoin activity offshore
- this could deepen “digital dollarization,” as market participants default to U.S. dollar-pegged tokens for global transactions
Central bankers at the Nicosia meeting reportedly challenged that narrative, arguing that:
- lighter foreign rules should not dictate EU standards for financial stability
- cross-border redemption caps and other prudential tools could be used to contain risk, even when tokens are issued outside the bloc
The exchange underlines a widening transatlantic policy gap: Washington is moving toward a more permissive regime for dollar-pegged coins, while Frankfurt and Brussels lean toward stricter oversight and a more bank-centric model for digital money.
MiCA review puts stablecoin rules back under scrutiny
The debate coincides with the European Commission’s review of the Markets in Crypto-Assets Regulation (MiCA), which came into force in 2024.
Under MiCA, issuers of asset-referenced and e‑money tokens:
- must hold a large share of reserves in bank deposits or other highly liquid instruments
- face tight rules on governance, disclosure and risk management
By contrast, the emerging U.S. model sets lighter reserve and liquidity constraints, particularly for dollar stablecoins covered under new federal frameworks.
As part of the MiCA review, with consultations running until 30 August, the Commission is examining whether to:
- align aspects of the EU regime more closely with the U.S. and UK approaches
- allow issuers to remunerate token holders
- require banks to issue stablecoins through separate legal entities to ring-fence risks
The ECB’s rejection of a central bank liquidity backstop signals that, even if MiCA is adjusted, euro stablecoins are unlikely to gain access to the same safety net as the banking system.
Euro stablecoins remain marginal despite high European usage
The global stablecoin market is growing rapidly, dominated by U.S. dollar-pegged tokens.
- global stablecoin supply rose about 33% in 2025 to around $300 billion, according to data cited by Reuters
- by April 2026, total capitalization exceeded $321 billion
- euro-linked tokens represent less than 0.4% of global supply, while nearly 99% of outstanding stablecoins are pegged to the dollar
Yet Europe remains a major user:
- during the final quarter of 2025, the region accounted for roughly 38% of global stablecoin transaction value
This mismatch — heavy European usage but a tiny euro-denominated segment — has become a central point in the policy debate. Supporters of a larger euro stablecoin market argue that the imbalance entrenches the dollar’s influence over digital finance. ECB officials counter that rapid expansion without strong safeguards would heighten systemic risk.
Bank-backed euro stablecoins advance under strict rules
Despite regulatory headwinds, private efforts to launch euro stablecoins are moving forward, largely from within the banking sector.
The Qivalis consortium, a group of 37 banks across 15 countries including BNP Paribas, ING and UniCredit, plans to issue a MiCA-compliant euro stablecoin later this year. Additional European lenders such as ABN Amro, Rabobank and Nordea have recently joined the initiative.
Qivalis aims to:
- offer a bank-backed token that fits squarely within existing prudential rules
- position its coin as a compliant alternative to offshore or unregulated tokens
However, the consortium will need to operate without ECB funding support and under relatively tight reserve and liquidity standards compared with non-EU issuers. Market participants expect that to limit the pace and scale at which euro-pegged tokens can grow, at least in the near term.
Digital euro on track, but banks fear deposit flight
Parallel to the stablecoin debate, the ECB is pressing ahead with its own central bank digital currency.
Officials at the Nicosia meeting reaffirmed the goal of launching a digital euro by 2029. European banks have raised concerns that a retail version could:
- divert deposits away from commercial lenders toward direct holdings at the central bank
- weaken banks’ funding base and squeeze their margins
Those fears echo their objections to private euro stablecoins, which they also see as competing for deposits. Lagarde has responded by backing a design in which:
- deposit balances remain within regulated banks
- tokenized versions of those deposits can circulate over distributed-ledger infrastructure
- the ECB acts as supervisor and settlement anchor, not as a direct rival to commercial banks
Under this model, privately issued stablecoins would remain outside the ECB’s safety net, maintaining a clear hierarchy between bank money, central bank money and non-bank tokens.
Strategic divergence from dollar stablecoin model
By refusing to open a liquidity window to euro stablecoin issuers, the ECB is defining a distinct path from the U.S. dollar stablecoin ecosystem.
Key implications include:
- euro stablecoin issuers must rely solely on their own reserves and market funding, with no expectation of emergency liquidity from the central bank
- in a stress scenario, the ability to redeem at par hinges entirely on reserve quality and transparency
- market users face higher intrinsic risk in euro-pegged tokens than in instruments explicitly or implicitly backed by a lender of last resort
For traders and firms building services around tokenized euros, that means:
- a premium on rigorous due diligence of issuers’ reserve portfolios and redemption mechanisms
- potential constraints on liquidity and scale compared with dollar markets
- continued reliance on dollar-pegged stablecoins for deep, global liquidity, even within Europe
Analysts note that this stance sits uneasily alongside optimistic projections, such as a recent S&P Global forecast suggesting euro stablecoins could exceed €1 trillion in market size by 2030 under favorable conditions. Current policy signals point to a more measured, bank-centric evolution.
ECB doubles down on tokenized deposits and wholesale projects
Lagarde’s public remarks have consistently drawn a line between:
- support for the underlying distributed-ledger technology
- skepticism toward privately issued stablecoins as a major component of the financial system
The projects she champions — Pontes for wholesale settlement and broader tokenized commercial bank deposit initiatives — preserve:
- central bank control over monetary anchors
- a primary role for supervised banks in issuing and managing digital money
The ECB’s latest decision in Nicosia confirms that, in Europe, innovation in digital finance is expected to proceed mainly through regulated banking channels, not through a new class of stablecoin firms with direct access to central bank support.
For deeper context on digital money oversight, explore how stablecoins work and why regulators treat them differently across regions.
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