Christine Lagarde is once again trying to rally support around the digital euro. For the head of the ECB, this is not just another technology project, but a way to respond to the rapid spread of dollar stablecoins in international payments.
So far, the balance is clearly not in Europe’s favor. According to CoinMarketCap, the capitalization of dollar stablecoins remains around $317 billion. The market for euro-pegged assets is much smaller and does not even reach $1 billion.
Major banks and some industry participants propose developing private euro stablecoins. At the ECB, this idea is met with caution. They believe that to strengthen the euro in digital settlements, Europe needs a digital euro issued by the central bank.
How Lagarde Responds to the Rise of Dollar Stablecoins
At the May Banco de España LatAm forum, Lagarde stated that the prospects for euro stablecoins are often overestimated.
The main concern of the ECB is that such assets can quickly lose stability in a stressful situation. In addition, if users begin to massively transfer money from bank deposits to stablecoins, it will be harder for the regulator to influence the economy through interest rates.
Lagarde cited USDC as an example. In 2023, after the collapse of Silicon Valley Bank, this stablecoin temporarily lost its peg to the dollar. For the ECB, this showed that even large and popular stablecoins are not immune to failures.
See Also: Spot ETF Trading Volume on HYPE Approaches $900 Million
The regulator is also concerned about another effect. If deposits start leaving the banking system, it will be harder for banks to lend to businesses. This means the ECB‘s decisions on rates will have less impact on the real economy.
Instead of private stablecoins, Lagarde proposes developing tokenized bank deposits. In her opinion, they are better suited for on-chain settlements and do not carry the same risk of mass withdrawals.
Lagarde’s position was supported by Isabel Schnabel from the executive board of the ECB. At a Bank of Korea conference in Seoul, she compared stablecoins to money market funds of the 1970s. Back then, such funds started pulling money out of banks, even though they also appeared to be stable instruments.
Schnabel specifically pointed to dollar dominance. Almost the entire stablecoin market today is tied to the dollar, and its further growth may strengthen the influence of the US not because of the state of the economy, but because of scale, network effect, and early start.
This is a sensitive issue for Europe. If dollar stablecoins become entrenched in tokenized finance, it will be harder for the euro to maintain a significant role in the new payment infrastructure.
When to Expect the Digital Euro
The digital euro is not ready yet. The project is still in the preparatory stage.
A pilot launch is expected no earlier than the second half of 2027. A limited number of banks and trading companies are to participate in the testing. The program, according to preliminary plans, will last about a year.
Even in a good scenario, the ECB does not expect a full-scale launch of the digital euro before 2029.
The European Parliament has already supported the overall framework of the project. In February, 420 deputies voted for an amendment that provides for the digital euro to work both online and offline.
See Also: Phishing via Bithumb Leads to $36 Million Theft from Humanity
Lagarde emphasizes that the digital euro should rely on European infrastructure. This is important to reduce dependence on Visa, Mastercard, and other foreign payment companies.
But the Private Sector Has Several Years’ Head Start
BNP Paribas, ING, UniCredit, and other banks have already created the Qivalis consortium. Its goal is to launch a euro-backed stablecoin. The project has applied for an electronic money issuer license from the Central Bank of the Netherlands.
The euro stablecoin market is still small, but growing. According to TRM Labs, transaction volume rose from $69 million in January 2025 to $777 million in March 2026.
Currently, the largest player remains EURC by Circle. The company received a French license under MiCA and controls more than half of the euro stablecoin segment.
So, while the ECB is preparing the digital euro, banks and crypto companies are already trying to secure a place in digital euro payments.
There Is No Unified Position in Europe
Not everyone supports Lagarde’s approach. The European Commission and some EU countries take a softer view of euro stablecoins. France, for example, sees them as a tool to strengthen the international role of the euro.
In an April report by Blockchain for Europe, prepared with the participation of former ECB Director General Ulrich Bindseil, it was stated that MiCA rules may be too strict. The authors warned that such restrictions could drive stablecoin companies out of Europe.
Board member of the Bundesbank Michael Teyrer also does not believe that Europe needs to choose only one option. According to him, both tokenized deposits and stablecoins are important. The latter do have risks, but it seems European regulators are not ready to completely abandon this direction.
