Stablecoins are reshaping the global financial landscape and setting off alarm bells at the European Central Bank (ECB).

ECB President Christine Lagarde has warned that these cryptocurrencies threaten to erode central banks' ability to control monetary policy , a key pillar of the fiat system.

Stablecoins have gained traction as digital assets pegged to fiat currencies, such as the dollar or the euro, attracting investors due to their stability in the volatile world of cryptocurrencies.

Its total market capitalization, in June, reached a record $228 billion by 2025, a 17% increase (33 billion) year-over-year. Tether's USDT leads the way with $155 billion, while Circle's USDC grew 39% to $61 billion.

This growth reflects their role in the cryptoasset markets, facilitating fast and stable transactions on exchanges . However, their expansion poses challenges, according to Lagarde, for regulators , since these currencies are issued by private companies like Circle and Tether, not central banks.

Lagarde's Warning

Lagarde expressed her concern: “I think [stablecoins] undermine our ability to manage monetary policy.” With eurozone inflation averaging 2.23% from 1991 to 2025, ranging from a peak of 10% in October 2022 to a low of -0.60% in July 2009, the ECB is protecting this balance.

In June 2025, annual inflation reached 2.0%, slightly above the 1.9% level in May and close to the medium-term target of 2%. Lagarde warned of a possible "privatization of money," a scenario she considers incompatible with the ECB's role as guardian of this stability.

ECB President Christine Lagarde fears that widespread use of stablecoins will reduce deposits in traditional banks. Source: commons.wikimedia.

The official noted that the widespread use of stablecoins could reduce deposits in traditional banks, limiting the ECB's ability to influence the economy through monetary policy. "Stablecoins should not be treated as money; rather, they are confused with means of payment or payment infrastructure due to the technology that powers them."

While Europe is approaching the phenomenon with caution, the United States is promoting stablecoins, backing them as a tool to reinforce the international hegemony of the dollar.

Under the Trump administration, the country is promoting regulations to encourage their use, especially of currencies like USDT and USDC. In June 2025, the Senate passed the GENIUS Act, which seeks to establish a clear regulatory framework. The bill, pending consideration in the House of Representatives between July 14 and 18, reflects a commitment to integrating these currencies into the financial system.

Fears for European sovereignty

Pierre Gramegna, director general of the European Stability Mechanism (ESM), warned that the United States could incentivize large technology companies to launch stablecoin-based payment solutions.

"If successful, they would undermine Europe's monetary sovereignty and economic stability," he noted. To counter this threat, Gramegna urged the ECB to accelerate the launch of the digital euro , a central bank digital currency (CBDC) under development since 2020.

Furthermore, with the MiCA Act, a European regulatory framework for crypto assets to protect consumers and ensure financial stability, Europe imposed limits on dollar-denominated stablecoins used for custodial services within its territory, although their use persists through personal wallets.

Ultimately, the growth of stablecoins poses a dilemma for regulators. If their widespread adoption displaces traditional money, central banks could lose influence over the economy. As stablecoins gain traction, the debate over their regulation and impact on the global economy intensifies. While the United States is betting on innovation, Europe is seeking to protect its monetary sovereignty with the digital euro.