Christine Lagarde cites USDC’s 2023 depegging as evidence stablecoins risk destabilizing underlying asset markets.
European Central Bank President Christine Lagarde said stablecoins will not enhance the euro’s international standing, citing Circle’s USDC losing its dollar peg in March 2023 after Silicon Valley Bank’s collapse. The episode demonstrated how redemption pressures can spill into broader markets, creating feedback loops between stablecoin redemptions and asset prices, particularly when issuers lack banking licenses.
Lagarde acknowledged stablecoins’ role in cross-border financial infrastructure but argued other tokenized instruments, including commercial bank deposits or central bank money, could serve the same function. She emphasized the need for public infrastructure to support alternative instruments within a framework anchored by central bank money, rather than rejecting technology outright.
The ECB’s response includes the Pontes project, which links distributed ledger platforms to the Eurosystem’s settlement infrastructure, enabling DLT-based transactions to settle directly in central bank money.