Lagarde vs. the Dollar: ECB’s Push to Curb U.S.-Issued Stablecoins Gains Momentum

The European Systemic Risk Board (ESRB) has proposed a ban on multi-jurisdictional stablecoin issuances, reflecting growing unease over the potential dominance of U.S.-backed digital currencies within Europe’s financial ecosystem. The recommendation specifically targets issuers such as Circle and Paxos, which currently operate stablecoins backed by U.S. dollar reserves and issued across multiple regions.

Under the ESRB’s proposal, providers would be prohibited from offering identical tokens across different jurisdictions while maintaining reserve assets in only one EU member state. The move aligns with the European Central Bank’s (ECB) broader campaign—led by President Christine Lagarde—to limit the circulation of foreign-issued stablecoins within the eurozone.

According to a Bloomberg report, the ESRB’s recommendation underscores Europe’s escalating concern about foreign influence over its financial stability. Although the board’s guidance is not legally binding, its institutional weight is considerable. Chaired by Lagarde and composed of EU central bank governors and senior financial officials, the ESRB’s positions often serve as a signal for national regulators to follow suit—or to publicly justify any decision not to.

Lagarde has consistently been one of the most outspoken critics of stablecoins, particularly those pegged to the U.S. dollar. Her stance is rooted in a long-term effort to safeguard European monetary sovereignty and reduce reliance on non-EU financial instruments. She has repeatedly cautioned that permitting foreign entities to issue or manage euro-accessible stablecoins introduces “significant legal, operational, liquidity, and financial stability risks” for the region.

ECB Tightens Grip on Dollar-Backed Stablecoins

The ECB president’s concerns are far from theoretical. An internal ECB presentation from April highlighted that reserves backing major stablecoins are typically held in U.S. dollar–denominated assets outside the European Union, a structure that effectively undermines the EU’s Savings and Investment Union initiative and limits the bloc’s oversight of cross-border capital flows.

Supporters of the ESRB’s recommendation point to the recently enacted GENIUS Act, which compels stablecoin issuers to hold reserves in dollar-based assets such as demand deposits and short-term U.S. Treasury bills, as evidence reinforcing the need for a multi-issuance ban.

If implemented, the ban would carry significant ramifications for U.S.-based issuers like Circle and Paxos—both of which currently hold EU licenses but keep their reserves primarily within the United States.

Although representatives from Circle, Paxos, and various EU market authorities declined to comment, industry insiders suggest that the ECB’s hardline stance could soon place it at odds with the European Commission, which had previously signaled a more open approach toward the multi-issuance stablecoin model.