ECB chief sees stablecoins as a threat to financial stability

The spread of stablecoins poses risks to financial stability and monetary sovereignty, according to Christine Lagarde, the head of the European Central Bank (ECB). She presented her position in an article for L’ENA hors les murs.

The head of the European regulator acknowledged that stablecoin issuers are trying to solve the problem of lack of trust in crypto assets. As a result, their instruments could gain traction in the payments sector.

In this scenario, Lagarde believes there is a threat of a “significant outflow” of bank deposits. Another risk lies in stablecoins backed by global companies.

“Their dominant position could harm competition and consumer choice, and raise concerns about privacy and the misuse of personal data,” wrote the ECB chief.

Touching on the topic of cryptocurrencies, Lagarde pointed to the absence of an issuer with obligations to consumers. In her words, users cannot rely on such assets due to high volatility, low liquidity and speculative nature, which hinders these assets from performing the functions of money.

In the article the ECB chief emphasized that the digital currency (CBDC) will supplement cash. Lagarde made the same statement in September, noting that regulators should harness the potential benefits of the technologies.

What is central bank digital currency (CBDC)?

In early October, ECB experts and 19 national central banks defined possible scenarios that would require the issuance of a digital euro.

Earlier in November, Lagarde said that the ECB faces a number of questions regarding CBDC. The launch of the asset could take up to four years.

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