Christine Lagarde said Europe should not view stablecoins as the primary solution for expanding the euro’s global influence, pushing back against proposals to counter the dominance of US dollar-backed stablecoins with euro-pegged alternatives.
Speaking Friday at the Banco de España LatAm Economic Forum in Roda de Bará, Lagarde discussed the evolving role of stablecoins in Europe’s financial system. She argued that the debate often incorrectly merges two separate aspects of stablecoins — their monetary role and their technological utility.
Lagarde said the discussion is “no longer about whether stablecoins should exist, but whether jurisdictions can afford to be without them,” while emphasizing that the benefits attributed to stablecoins are frequently overstated because their monetary and technological functions are treated as one and the same.
Her remarks represent one of the clearest rejections yet of the idea that euro-backed stablecoins should serve as Europe’s answer to dollar-based stablecoins, which currently account for around 98% of the global market. While the US has increasingly promoted dollar stablecoins as a tool to reinforce the dollar’s reserve currency status, Lagarde argued that Europe should instead focus on developing tokenized financial infrastructure supported by central bank money.
She pointed to initiatives such as the Eurosystem’s Pontes project for wholesale settlement and the Appia roadmap aimed at building an interoperable European tokenized finance ecosystem.
At the same time, Lagarde acknowledged that euro-denominated stablecoins operating under Markets in Crypto-Assets Regulation (MiCA) could potentially increase global demand for euro-area safe assets. However, she warned that such benefits come with notable risks, including financial instability, vulnerability to bank-run-style events, reserve fragility and weaker monetary policy transmission if deposits migrate away from traditional banks.
Christine Lagarde pointed to the 2023 collapse of Silicon Valley Bank as an example of the risks tied to stablecoins, noting that USD Coin (USDC) temporarily lost its dollar peg after issuer Circle disclosed exposure to the failed bank.
According to Lagarde, the incident demonstrated how quickly market confidence can deteriorate and how redemption pressure can spill over into the underlying asset markets. She warned that as stablecoin adoption expands, these dynamics could create destabilizing feedback loops between redemptions and asset prices, particularly when issuers operate outside the traditional banking system.
On the technological side, Lagarde acknowledged that stablecoins can improve cross-border financial infrastructure by enabling transactions without relying on complex legacy intermediaries. However, she argued that this capability is not exclusive to stablecoins.
Lagarde said other forms of tokenized money — including tokenized commercial bank deposits and central bank money — could serve the same function within distributed ledger technology (DLT) systems. Rather than discouraging stablecoins entirely, she said policymakers should focus on building public infrastructure that allows stablecoins and other tokenized assets to operate within a framework backed by central bank money.
She highlighted the Eurosystem’s Pontes project, which is designed to connect distributed ledger platforms with the eurozone’s existing settlement infrastructure, allowing DLT-based transactions to settle directly in central bank money.
Lagarde also referenced the Appia roadmap, published in March, which outlines plans for a fully interoperable European tokenized financial ecosystem by 2028.
“Europe knows which port it is sailing to,” Lagarde said, adding that the region’s goal should not be to replicate financial instruments developed elsewhere, but instead to create infrastructure aligned with Europe’s own priorities while capturing the benefits of innovation without importing its associated risks.
