The European Central Bank has issued a serious warning about the dangers of digital currencies.
The European Central Bank has issued a serious warning regarding proposals to expand the issuance of digital currencies, particularly euro-denominated stablecoins, by eurozone finance ministers, Zamin.uz reports.
Bank officials believe such initiatives could weaken the existing bank lending system and significantly complicate the implementation of monetary policy. According to Reuters, these objections were raised during an informal meeting of the Economic and Financial Affairs Council in Nicosia.
At the meeting, a special report prepared by the Bruegel analytical center was discussed. Bruegel analysts proposed developing the euro stablecoin market and easing liquidity requirements for issuers to help them compete with dollar-denominated rivals.
They also suggested granting these companies access to European Central Bank funding. Currently, although eurozone residents account for nearly thirty-eight percent of global stablecoin transactions, euro-denominated tokens make up less than one percent of the total market.
At present, the largest euro stablecoin, EURC, ranks eleventh in the global ranking. European Central Bank President Christine Lagarde firmly opposed these proposals.
She emphasized that unchecked growth in stablecoin issuance could reduce deposit volumes in banks, increase financing costs for commercial banks, and thereby impair the central bank’s ability to effectively manage interest rates and stabilize the economy.
Participants also expressed skepticism about the idea of extending privileges—currently reserved for regulated traditional banks—to private stablecoin firms. Lagarde stated that developing a central bank-backed, tokenized financial infrastructure would be more appropriate than relying on private stablecoins.
She favors special projects for large-scale payments and the implementation of new roadmaps. While analysts have warned that stricter rules in the U.S. could accelerate digital dollarization, ECB officials dismissed these concerns.
On the contrary, they stressed the need to impose strict limits to preserve financial stability and protect against sudden outflows of reserves.
