The European Central Bank (ECB) confirms its ambitions to issue a digital euro, and this decision could radically change the balance of power in the stablecoin market. In a recent speech, Executive Board member Isabel Schnabel outlined a firm stance: tokenized money should be issued exclusively by the central bank, not by private issuers.
Why is the ECB against stablecoins?
At first glance, stablecoins can be made as reliable as possible, and Schnabel agrees with this. However, the key problem lies in their vulnerability during times of crisis. When panic hits the market, everyone simultaneously rushes to convert assets into fiat. The central bank can quickly increase liquidity, whereas a private stablecoin issuer cannot. As a historical illustration, she cited the banking panic of 1907, when a money supply tied to government bonds proved inelastic, which led to the creation of the Federal Reserve System in 1913.
Schnabel emphasizes that stablecoins should be viewed not as a replacement, but only as a complement to central bank money. And the statistics explain Europe's urgency: the volume of dollar-denominated stablecoins in circulation is about $304 billion, while tokens pegged to the euro barely reach $1 billion. If settlements shift to private tokens, Europe would effectively conduct transactions in dollars, threatening the region's financial sovereignty.
Project Pontes: The ECB enters the blockchain
Next month, the Pontes project will launch, connecting the key settlement infrastructure TARGET Services with market blockchain platforms. The technology has already been tested: from May to November 2024, 64 organizations from nine countries ran 58 scenarios, settling nearly €1.6 billion in central bank money.
Schnabel considers three possible paths: direct token issuance, creating a bridge between systems, or transferring the tokenization of reserves to a private company via an omnibus account. She strongly supports the first option. Otherwise, the ECB would remain merely an observer, unable to conduct repo operations through code.
Analyst's view
The ECB's initiative is not just a technical step, but a strategic maneuver to maintain control over the monetary system in the era of digitalization. The case of the French company Lise, which received the first EU license for a tokenized exchange, is telling: the regulator sees this as proof that tokenization opens markets to small businesses. However, for the crypto industry, this is a dual signal: on the one hand, recognition of blockchain, and on the other, a strict limitation on the role of private stablecoins. Investors should prepare for increased regulatory pressure on this segment in the eurozone.