Key Takeaways:

• ECB official Isabel Schnabel warned that growing stablecoin use could create risks for banks, markets, and monetary policy.
• Dollar-backed stablecoins dominate the market and may further strengthen the US dollar’s influence in global finance.
• The ECB sees a digital euro as a way to protect Europe’s financial independence and modernize public money.

A senior European Central Bank official warned on 1 June 2026 that stablecoins pose serious risks to financial stability, monetary policy, and the global monetary system, arguing that a digital euro is Europe’s best answer.

Isabel Schnabel, a member of the ECB’s executive board, made the remarks at the 2026 Bank of Korea International Conference in Seoul. The ECB oversees monetary policy for the 21 countries that use the euro.

Stablecoins are cryptocurrencies designed to maintain a stable value, usually by being linked to a traditional currency such as the US dollar. However, Schnabel said that their stability may not be as secure as it appears.

A $320-billion market tilted toward the US dollar

The global stablecoin market has climbed to nearly $320 billion. Tether’s USDt (USDT) and Circle’s USDC (USDC) together control roughly 90% of the market, and both are pegged to the US dollar. By comparison, euro-denominated stablecoins have a combined value of only around 500 million euros.

Schnabel warned that the heavy reliance on dollar-backed stablecoins could further strengthen the dollar’s position in global finance. She highlighted that this advantage stems less from the strength of the US economy and more from network effects, where a currency becomes more useful and harder to replace as more people and businesses adopt it.

Over time, she said, this trend could gradually reduce the euro’s influence in digital payments and finance, including within relatively stable regions such as Europe.

Learn More: What Are Stablecoins, and How Do They Work?

Runs, banking stress, and weakened monetary policy

Schnabel highlighted three main concerns.

First, stablecoins remain vulnerable to runs: A loss of confidence in the assets backing a stablecoin may make many redeem their holdings at the same time. This could force issuers to sell reserve assets (backing that stablecoin) quickly, creating stress across financial markets. Because crypto markets operate around the clock, such events can unfold much faster than in traditional finance.

Second, a large shift from bank deposits into stablecoins could reduce an important source of funding for banks. Banks may then need to rely on more expensive and less stable forms of financing, increasing risks across the financial system.

Third, widespread stablecoin adoption could make it harder for central banks’ interest-rate decisions to influence borrowing, spending, and saving across the economy, reducing their effectiveness.

Related: Europe’s Biggest Banks Back a New Digital Euro Project

The ECB’s case for a digital euro

Rather than resisting innovation, Schnabel argued that central banks should create safeguards while modernizing public money. She said a digital euro, which is government-backed digital cash issued by the ECB, would help preserve access to public money, reduce Europe’s dependence on foreign payment providers, and support the euro’s role in digital finance.

The project is currently in a technical preparation phase, with a testing program planned for the second half of 2027 and a potential launch by 2029, subject to legislation expected in 2026.

The ECB’s approach differs sharply from that of the United States. On 28 May 2026, US Treasury Secretary Scott Bessent reiterated that the administration does not support issuing a digital dollar and instead favors private-sector stablecoins.

Stablecoin regulation is becoming a bigger focus for policymakers worldwide. In Europe, a future review of Markets in Crypto-Assets (MiCA), the European Union’s crypto regulatory framework, could influence which stablecoin products remain available and how easily users can move funds between crypto platforms, wallets, and traditional bank accounts.