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European Central Bank board member Isabel Schnabel warned that dollar stablecoins could strengthen the U.S. dollar’s role in digital finance and limit the euro’s place in tokenized markets.
Schnabel made the comments at a Bank of Korea conference in Seoul on June 1. She said the risk extends beyond payments and could affect monetary sovereignty and cross-border liquidity over time.
Dollar Reserve Share Has Fallen Below 57%
Schnabel said most stablecoins are pegged to the dollar. She warned that wider use could support dollar dominance through network effects, scale and first-mover advantage, rather than stronger U.S. fundamentals.
She said the dollar’s share of global foreign-exchange reserves has already fallen below 57%, down from about 70% around the turn of the century. Stablecoins could slow or even reverse that decline, she said.
Weaker Economies Face Stablecoin Dollarization Risk
The ECB sees the most immediate risk in countries with weaker monetary credibility. In those markets, residents could move into dollar stablecoins and reduce the local central bank’s control over monetary policy.
Schnabel said stronger economies, including the euro area, could also face longer-term costs. Dollar stablecoins could deepen dollar invoicing and increase global dollar liquidity holdings in tokenized markets.
ECB Warning Supports Digital Euro Push
The warning fits the ECB’s broader caution on stablecoins and its support for a digital euro. Last month, ECB officials pushed back against proposals to ease rules governing euro stablecoins.
Officials warned that looser rules could weaken bank funding and make interest-rate control harder. ECB President Christine Lagarde has also argued that euro stablecoins could add stress in crises and are not the best way to strengthen the euro internationally.
Digital Euro Still Awaits Legislation
Private stablecoins are already scaling, and most of the market remains dollar-based. The digital euro still needs legislation before it can move further toward launch.
The ECB’s immediate concern is that tokenized finance could develop around dollar-denominated private money before Europe has a stronger public-money option for the digital era.
