With stablecoins approaching a $300 billion market, the European Central Bank has reiterated its call for a digital euro. Officials believe a digital euro is essential for safeguarding the financial system and ensuring central bank money remains a key part of how payments are made.
Summary
- ECB board member Isabel Schnabel warned that stablecoins could create financial stability risks as the sector approaches a $300 billion market value.
- Schnabel said dollar-backed stablecoins could strengthen the U.S. dollar’s global position, while euro-denominated stablecoins remain a small part of the market.
- The ECB continues to back a digital euro project, with a pilot expected in 2027 and potential issuance readiness targeted for 2029.
Isabel Schnabel, a key member of the European Central Bank, has warned that the fast rise of stablecoins could create problems for the financial system, how monetary policy works, and the global monetary system.
At a conference in Seoul on Monday, Bank of Korea official Schnabel explained that stablecoins could still face sudden collapses if people lose trust in what supports their value.
According to Schnabel, stablecoins have potential weaknesses due to a mismatch between their assets and liabilities, and they can become shaky if people lose confidence in what backs them. She also cautioned that the industry’s strong dependence on U.S. dollar-based tokens might strengthen the dollar’s dominance in the global financial system.
According to Isabel Schnabel, the increasing popularity of stablecoins could strengthen the U.S. dollar’s position as the world’s main currency. Currently, almost all stablecoins are valued in dollars, and other currencies have very little impact.
According to data from the European Central Bank, highlighted by Isabel Schnabel, the stablecoin market is now nearly $300 billion in size, although its growth has recently slowed down. The two largest stablecoins, Tether’s USDT and Circle’s USDC, make up around 90% of this market.
ECB points to digital euro as policy response
Instead of blocking new technologies, Schnabel argues that central banks should focus on creating rules that keep people confident in money and allow them to effectively manage the economy.
Instead of fighting new ideas, we should guide their development in a way that maintains a stable economy, manages the money supply, and keeps people confident in our currency.
According to Schnabel, a digital euro would ensure Europeans continue to have access to central bank money and lessen their reliance on payment companies from outside Europe. She believes a digital currency issued by the central bank could become a widely used payment method across Europe, with official currency status, and help unify the region’s currently fragmented payment systems.
These statements follow the European Central Bank’s work on creating a digital euro. Earlier this year, in March, ECB official Piero Cipollone informed European leaders that the bank plans to release the technical requirements for the digital euro in 2026. This will give banks, payment companies, and businesses time to get their systems ready before a final decision is made about launching it.
The European Central Bank (ECB) is collaborating with several European payment groups – including the European Card Payment Cooperation, nexo standards, and the Berlin Group – to build the digital euro. They’ll be using existing payment standards, which the ECB says will lower costs and allow businesses to easily add digital euro services to their current systems instead of creating entirely new ones.
Cipollone explained that a digital euro wouldn’t eliminate cash or bank accounts, but instead work alongside them. He also believes keeping payment systems within Europe would boost the region’s economy and lessen its dependence on payment networks based outside of Europe.
Launch readiness targeted for 2029
The European Central Bank (ECB) is still developing the digital euro. According to the ECB’s website, the project is now in the technical preparation stage. They anticipate the necessary laws will be approved in 2026, and then a year-long trial period will begin in the latter half of 2027 to test how it works for both individual transfers and payments at stores.
If the necessary laws are passed, the European Central Bank aims to be prepared to issue a digital euro by 2029.
Schnabel also highlighted the differences between how Europe and the United States are handling digital currencies. This came shortly after U.S. Treasury Secretary Scott Bessent reaffirmed his administration’s opposition to a U.S. central bank digital currency, while also urging Congress to pass the Clarity Act.
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2026-06-01 12:32