ECB Executive Board member Isabel Schnabel used a Bank of Korea conference speech in Seoul to argue that stablecoins pose challenges for financial stability, monetary policy and the international monetary order. Her central point was that private tokenized money should complement, not displace, public money, with central bank settlement remaining the anchor of digital finance.
The speech sharpened the ECB’s case for a digital euro and wholesale central bank money. Schnabel presented the Eurosystem’s strategy as a two-part response, combining a retail digital euro for public access with tokenized central bank money for wholesale settlement.
Stablecoins Raise Run, Policy and Dollar Risks
Schnabel compared stablecoins with money market funds, arguing that both can promise liquidity and stable value while carrying run risk. Stablecoins may face rapid redemptions and fire sales if confidence in reserves weakens, especially because tokenized markets operate continuously while reserve assets often still settle on traditional timelines.
The ECB also warned that stablecoins can affect monetary transmission. If households or firms shift deposits into stablecoins, banks may face a less stable funding base, making lending conditions more sensitive to wholesale funding costs and policy changes.
The international concern is dollar dominance. Schnabel said virtually all stablecoins in circulation are dollar-denominated, and ECB research suggests broad use of dollar stablecoins could amplify the international transmission of U.S. monetary policy.
That risk is not limited to weaker monetary systems. From a European perspective, persistent dollar stablecoin dominance could limit the euro’s role in tokenized finance, with network effects and first-mover advantages reinforcing the dollar rather than euro-denominated payment instruments.
Digital Euro Becomes the Public-Money Anchor
The ECB’s answer is not to reject tokenization, but to modernize public money. Schnabel said the Eurosystem wants to provide a public settlement asset that supports private innovation, including tokenized deposits and stablecoins, while preserving central bank money as the final settlement layer.
The digital euro is framed as a sovereignty tool. It would preserve public access to central bank money, reduce dependence on non-European payment providers and create a pan-European payment solution with legal tender status.
The ECB is working on Pontes and Appia. Pontes would connect DLT-based transactions with TARGET settlement in central bank money, while Appia is intended to explore tokenized central bank money, DLT-based collateral management and interoperability for tokenized traditional assets.
The ECB wants innovation to develop around traceable, regulated and central bank-anchored settlement, rather than allowing private stablecoins to become the dominant monetary layer.
The practical implication is heavier alignment with Eurosystem infrastructure. Compliance, treasury and risk teams should prepare for more scrutiny of reserve quality, liquidity risk, redemption mechanics and settlement finality as stablecoins and tokenized assets move closer to mainstream finance.
