Stablecoins, with a market value approaching $300 billion, have sparked new warnings from the European Central Bank, whose officials say a digital euro is necessary to protect financial stability and preserve the role of central bank money in the payments system.
summary
- European Central Bank Governing Council member Isabel Schnabel warned that stablecoins could create risks to financial stability as the sector approaches a market value of $300 billion.
- Schnabel said dollar-backed stablecoins could boost the global position of the US dollar, while euro-denominated stablecoins remain a small part of the market.
- The European Central Bank continues to support the digital euro project, with a pilot expected in 2027 and a possible launch in 2029.
According to Isabel Schnabel, a member of the Executive Board of the European Central Bank, the rapid growth of stablecoins has led to risks that may affect financial stability, monetary policy and the international monetary system.
Speaking at the Bank of Korea’s 2026 International Conference in Seoul on Monday, Schnabel said stablecoins remain vulnerable to withdrawals if users lose confidence in the assets they back.
Schnabel told conference participants that stablecoins face a liquidity mismatch and can become unstable when confidence in reserve assets deteriorates. It also warned that the sector’s heavy reliance on dollar-denominated currencies could strengthen the US dollar’s position in global finance.
“The increasing use of stablecoins may further strengthen the international dominance of the US dollar. Today, almost all stablecoins in circulation are denominated in dollars, with other currencies playing a minimal role,” – Isabelle Schnabel.
European Central Bank figures cited by Schnabel show that the stablecoin market has grown to nearly $300 billion, although the expansion has slowed compared to previous periods. Together, Tether’s USDT and Circle’s USDC account for about 90% of the market, she said.
The European Central Bank points to a digital euro as a policy response
Instead of opposing technological innovation, Schnabel said central banks should create safeguards that maintain confidence in money and maintain effective monetary control.
“The appropriate response is therefore not to resist innovation, but to ensure its development within a framework that maintains stability, monetary control and confidence in the currency.”
Within Europe, Schnabel argued that a digital euro would help maintain public access to central bank money while reducing reliance on foreign payment providers. She said a retail CBDC could serve as a pan-European payment option with fiat tender status and help address fragmentation across the payments market in the region.
Her comments are based on the European Central Bank’s ongoing digital euro project. Back in March, ECB Executive Board member Piero Cipollone He said European lawmakers expect the central bank to publish technical standards for a digital euro in 2026, allowing banks, payment companies and merchants to prepare their systems ahead of any final issuance decision.
Under the agreements announced by the European Central Bank in April a partner With the European Card Payment Cooperation, Nexo Standards and the Berlin Group to reuse existing European payment standards for digital euro transactions. The ECB said this approach would reduce implementation costs and allow payment providers to integrate digital euro services through existing infrastructure rather than building entirely new systems.
According to Cipollone, a digital euro would complement cash and bank deposits rather than replace them, and said that preserving European payments infrastructure could help retain payment revenues within the region and reduce reliance on international payment networks.
Preparing for a targeted launch of 2029
As work on the project continues, the ECB’s website states that a digital euro is currently in the technical preparation stage. The central bank expects digital euro legislation to be adopted in 2026, followed by a 12-month pilot program starting in the second half of 2027 that will test person-to-person and point-of-sale payments.
Subject to the legal framework being approved, the ECB has said it wants to be technically ready for a potential issuance by 2029.
Elsewhere, Schnabel compared the European approach with that of the United States. Her statements came a few days after those of US Treasury Secretary Scott Bessent repeat The current administration does not support the creation of a US central bank digital currency while encouraging Congress to move forward The law of clarity.
