Lagarde Urges Tokenized Infrastructure Over Stablecoins

European Central Bank President Christine Lagarde urged European policymakers on Friday to develop tokenized financial infrastructure anchored in central bank money rather than promote privately issued euro-denominated stablecoins. Speaking at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, Lagarde argued that stablecoins are not the optimal path to enhancing the euro's international role amid dominance by U.S. dollar-pegged tokens, which hold over 90 percent of the market.

Lagarde separated stablecoins' appeal into two functions: a monetary one, which could boost demand for euro-area safe assets, and a technological one enabling efficient cross-border payments without legacy intermediaries. While acknowledging potential short-term benefits like lower transaction costs, she highlighted significant risks that outweigh them. These include financial stability threats from redemption runs and depegging events, as seen in 2023 when Circle's USDC stablecoin lost its peg after exposure to the collapsed Silicon Valley Bank. Such incidents, she said, can create feedback loops between redemptions and asset prices, especially for non-bank issuers.