The European Central Bank published a speech by Executive Board member Isabel Schnabel arguing that stablecoins may improve payment and settlement efficiency but could also heighten financial stability risks, alter monetary policy transmission and further entrench the US dollar in global finance. Speaking at the Bank of Korea International Conference on Central Banks and the Future of Money, she said central banks should respond by strengthening the regulatory framework for stablecoins and by upgrading public payment and settlement infrastructure rather than trying to block private innovation. The speech draws a historical parallel with money market funds, which increased competition and market-based finance but also contributed to bank disintermediation and episodes of stress. Similar vulnerabilities could arise if households and firms shift deposits into stablecoins, leaving banks more reliant on volatile wholesale funding, or if reserve assets prove illiquid and trigger runs and fire sales. Global stablecoin market capitalisation is now close to USD 300 billion and remains overwhelmingly concentrated in US dollar tokens, while euro-denominated stablecoins are still small at about EUR 500 million. Under the EU's Markets in Crypto-Assets Regulation, at least 30% of reserves must be held as bank deposits and 60% for significant stablecoins, which can improve reserve liquidity but also create contagion channels between issuers and banks. Wider adoption could tighten bank lending conditions even as reserve demand for short-term government debt lowers sovereign yields, and a dollar-centric stablecoin market could amplify international spillovers from US monetary policy and intensify currency substitution abroad. For the Eurosystem, Schnabel framed the strategic response as preserving central bank money as the anchor of the system through a digital euro for retail use and tokenised central bank money for wholesale settlement. She pointed to the Pontes and Appia projects as the ECB's current workstreams for settling distributed ledger technology transactions in central bank money and for building a broader tokenised European financial ecosystem.
European Central Bank2026-06-01
European Central Bank's Schnabel warns stablecoins could heighten run risk and dollar dominance and points to digital euro response
The European Central Bank published a speech by Executive Board member Isabel Schnabel warning that while stablecoins can improve payment and settlement efficiency, they may increase financial stability risks, affect monetary policy transmission and reinforce US dollar dominance. She called for stronger regulation of stablecoins and upgrades to public payment and settlement infrastructure, including a retail digital euro and tokenised central bank money for wholesale settlement. Schnabel noted that global stablecoin market capitalisation is nearing USD 300 billion, is heavily concentrated in US dollar tokens, and that the Eurosystem is advancing related work through its Pontes and Appia projects.