ECB Rejects Proposals to Expand Euro Stablecoins
The European Central Bank warned EU finance ministers that increasing euro stablecoin issuance could reduce bank lending and weaken control over interest rates. Officials resisted calls to ease liquidity rules for crypto issuers, favoring tokenized commercial bank deposits instead.
The European Central Bank (ECB) warned against proposals to loosen regulations for euro-denominated stablecoins during a meeting in Cyprus on Friday. The central bank indicated that expanding the stablecoin market could drain bank deposits and weaken its control over interest rates. This resistance signals a specific challenge for firms attempting to compete with the dominance of dollar-backed digital assets in Europe.
### Stability Risks and Policy Control ECB President Christine Lagarde and other central bankers argued that shifting funds from bank accounts to stablecoin issuers makes bank funding less stable. This process, known as disintermediation, could raise costs for lenders and reduce the credit available to the broader economy. Sources told Reuters that the ECB is prioritizing the protection of the traditional banking sector over rapid crypto expansion.
