ECB blocks euro stablecoin rule easing, warns it would drain bank deposits and destabilize lending!

Christine Lagarde and several ECB colleagues pushed back Friday against a Bruegel think-tank proposal that would have loosened liquidity requirements for euro stablecoin issuers and opened an ECB backstop to them — a role the central bank says belongs exclusively to supervised banks. The closed-door rebuff came at an informal EU finance ministers and central bank governors meeting in Nicosia, Cyprus.

The ECB's core objection: allowing stablecoin issuers to pull deposits out of European banks at scale would raise lenders' funding costs and crimp their capacity to extend credit. Lagarde has been consistent on this — earlier this month she told a Banco de España forum that any boost to the euro's international standing from a thriving stablecoin market is outweighed by financial stability and monetary-policy transmission risks.