ECB Executive Board member Isabel Schnabel said Monday that stablecoins pose serious risks to financial stability and monetary policy, and that the central bank’s best response is to ensure public money remains the anchor of the financial system.
Speaking at a Bank of Korea conference in Seoul, Schnabel acknowledged that private monetary innovation like stablecoins can offer “significant benefits,” but warned they could also increase the risk of bank runs during periods of stress, weaken interest-rate transmission, and cement the dollar’s international dominance.
Digital euro as the answer
The ECB’s strategy rests on the digital euro as a retail central-bank digital currency and tokenized central-bank money as a wholesale CBDC, Schnabel said.
She added:
“It remains to be seen whether, in such an environment, stablecoins can find their place in the financial system just as money market funds did 50 years ago, or whether other innovations, like tokenized deposits, will prove to be the more promising alternative.”
Her comments come as stablecoins — mostly pegged to the US dollar — have surged in popularity, boosted by President Donald Trump’s push to make crypto more mainstream.
Fears over European monetary sovereignty
The stablecoin boom has raised fears that such instruments could gain a foothold in Europe, threatening regional banks and monetary sovereignty.
Bundesbank President Joachim Nagel in February touted euro-denominated stablecoins as a potential solution, while ECB President Christine Lagarde last month struck a sharply critical tone.
Schnabel echoed Lagarde’s skepticism, noting that “many of the advantages of stablecoins arise from the technology on which they are based rather than from the characteristics of the instrument itself.”
Her remarks came a day after Federal Reserve Governor Christopher Waller said the global spread of stablecoins could broaden the reach of US monetary policy, while also calling CBDCs a “stupid thing.”
Inflation warning on Iran war
Schnabel also addressed the war in Iran, saying the ECB can no longer look past its inflationary impact as price pressures spread beyond energy.
Damage to energy infrastructure and global supply chains has already altered price dynamics in a lasting way, she warned, meaning policymakers may need to act even if the conflict ended immediately.
She said:
“We can no longer look through this shock. The risk of de-anchoring inflation expectations is rising.”
Schnabel, widely regarded as the ECB’s most hawkish policymaker, said a rate hike at the June 10–11 meeting would be needed, though she declined to specify how many total increases might follow.
