The European Central Bank rebuffed a proposal Friday that would have eased liquidity requirements for euro stablecoin issuers and granted them access to ECB liquidity, according to a Reuters report citing three people familiar with closed-door discussions. The proposal came from a policy brief by Brussels think tank Bruegel, presented to EU finance ministers and central bank governors at a two-day informal meeting in Nicosia, Cyprus. ECB President Christine Lagarde and several other central bankers opposed the plan, arguing that allowing stablecoin issuers to withdraw deposits from European banks at scale would raise lenders' funding costs and reduce their capacity to extend credit. Several officials also rejected the idea of turning the ECB into a backstop for stablecoin firms, a role traditionally reserved for supervised banks. The intervention reflects Lagarde's position outlined earlier this month, in which she stated that any benefit a euro stablecoin might bring to the currency's international standing is outweighed by risks to financial stability and monetary-policy transmission.
ECB's Stated Concerns
Lagarde has consistently prioritized stability over stablecoin expansion. At a Banco de España forum, she argued that "the case for promoting euro-denominated stablecoins is far weaker than it appears." She has instead pointed to tokenized commercial bank deposits and the ECB's Pontes and Appia wholesale settlement projects as the appropriate on-chain infrastructure for Europe.
Central bankers at the Nicosia meeting also pushed for redemption restrictions on stablecoins regardless of where they are issued, warning that without such limits a European arm could face a run on reserves if foreign holders cashed out at scale.
Bruegel Proposal and Rationale
The policy brief was authored by Lucrezia Reichlin, Bo Sangers, and Jeromin Zettelmeyer. The authors argued that more permissive rules and an ECB backstop are needed to grow a euro stablecoin market that remains marginal in a sector dominated by dollar tokens. Bruegel framed the issue as a competitiveness concern, warning that keeping EU rules tougher than the US GENIUS Act, signed into law in July 2025, will push issuance and trading offshore and accelerate what they termed "digital dollarization."
Central bankers at the meeting downplayed this concern, according to Reuters.
Regulatory Framework and Market Dynamics
The pushback occurs as the European Commission reviews its Markets in Crypto-Assets Regulation (MiCA), in force since 2024, which requires stablecoin issuers to hold a large share of reserves in bank deposits and other liquid assets. The US framework imposes lighter requirements, an approach supporters frame as a way to lock in dollar dominance through regulated tokens, Reuters noted.
Despite the regulatory debate, private issuers are advancing independently. The Qivalis consortium, an Amsterdam-based joint venture pursuing authorization from De Nederlandsche Bank, has grown to 37 banks across 15 countries and plans to launch a MiCA-compliant euro stablecoin in the second half of this year. The group counts BNP Paribas, ING, UniCredit, CaixaBank, and Danske Bank among its founders, and recently added ABN Amro, Rabobank, Nordea, and Intesa Sanpaolo. Reuters cited the Qivalis launch alongside earlier efforts from Societe Generale as evidence that European banks are not waiting for the regulatory debate to settle.
Market Scale and Activity
Global stablecoin supply expanded by roughly a third in 2025 to $300 billion, per Artemis data cited in the Bruegel paper. Euro-pegged tokens make up just 0.3% of that total, with Circle's EURC the largest. Europe-based stablecoin activity nonetheless accounted for 38% of global transaction volume in the final quarter of 2025, Reuters said.
ECB's Alternative Path
The ECB still aims to launch a digital euro by 2029, and EU finance ministers reaffirmed at the Nicosia meeting that work on the project will continue, per Reuters. Lagarde's preferred design keeps deposit-based money inside supervised banks while allowing tokenized representations of those deposits to operate on distributed-ledger rails alongside a future digital euro, leaving private stablecoin issuers outside the central bank's protective perimeter. European banks have separately resisted the retail CBDC initiative on grounds that adoption could pull deposits out of the system, mirroring the funding concerns now being raised against private euro stablecoins.
