ECB’s Schnabel says digital euro needed as stablecoin market approaches $300B

Stablecoins approaching a market of 300 billion have caused new warnings from the European Central Bank, whose officials say that the digital euro is necessary to protect financial stability and maintain the role of central bank money in the payment system.

According to Isabel Schnabel, a member of the Executive Board of the European Central Bank, the rapid growth of stablecoins has brought risks that may affect financial stability, monetary policy, and the international financial system.

Speaking at the 2026 Bank of Korea International Conference in Seoul on Monday, Schnabel said stablecoins are always at risk of a run if users lose confidence in the assets that support them.

Schnabel told conference participants that stablecoins suffer from financial volatility and may become unstable when trust in the underlying asset deteriorates. He also warned that the sector’s heavy reliance on dollar tokens could strengthen the US dollar’s position in global finance.

“The increasing use of stablecoins may further strengthen the international dominance of the US dollar. Today, almost all stablecoins are circulated in dollars, and other currencies play a negative role,” – Isabel Schnabel.

ECB figures cited by Schnabel show that the stablecoin market has grown to around $300 billion, although the growth has slowed down compared to previous periods. He said Tether’s USDT and Circle’s USDC together make up about 90% of the market.

The ECB is pointing to the digital euro as a policy response

Instead of opposing technological innovation, Schnabel said central banks should create safeguards that maintain trust in money and maintain effective control over money.

“So the right response is not to resist innovation but to ensure that it develops within a framework that maintains stability, financial control and financial trust.”

In Europe, Schnabel argued that the digital euro would help preserve public access to central bank money while reducing dependence on foreign payment providers. He said the central bank’s digital currency could serve as a European international payment option with legal tender status and help address fragmentation within the region’s payment markets.

His comments build on the ECB’s ongoing digital euro project. Back in March, ECB Executive Board member Piero Cipollone told European lawmakers that the central bank expects to publish technical standards for the digital euro in 2026, allowing banks, payment firms, and merchants to prepare their plans before any final decision on the issue.

Under the agreements announced in April, the ECB has partnered with the European Card Payment Cooperation, nexo standards, and the Berlin Group to re-use the existing European payment standards for euro digital transactions. The ECB said this approach would reduce implementation costs and allow payment providers to integrate digital euro services by using existing infrastructure rather than building entirely new systems.

According to Cipollone, the digital euro will complement cash and bank deposits instead of replacing them and argued that maintaining the European payment infrastructure would help maintain regional payments and reduce reliance on international payment networks.

Launch of readiness targeted for 2029

As work on the project continues, the ECB’s website states that the digital euro is currently in the technology preparation phase. The central bank expects the digital euro rule to be adopted in 2026, followed by a 12-month pilot starting in the second half of 2027 that will test person-to-person and point-of-sale payments.

Provided the draft law is approved, the ECB said it wants to be technically ready for issuance by 2029.

Elsewhere, Schnabel compared the European approach to that of the United States. His comments came a few days after US Treasury Secretary Scott Bessent reiterated that the current administration does not support the creation of a digital currency by the US central bank while urging Congress to advance the Clarification Act.