European Central Bank Executive Board member Isabel Schnabel stated that stablecoins pose multiple risks to financial stability and monetary policy, with the best response being to ensure public money continues to serve as the core anchor of the financial system.

Schnabel noted on Monday that while innovations in private money, such as stablecoins, can offer "significant benefits," these instruments may also amplify the risk of bank runs during periods of financial market stress, weaken the transmission of interest rate decisions, and further entrench the dominance of the U.S. dollar in the international monetary system.

Schnabel said: "Therefore, central banks and regulators need to be prepared to adjust regulatory frameworks, monetary policy implementation mechanisms, and payment infrastructure in a more flexible manner to safeguard financial stability, maintain monetary control, and ensure that sovereign currencies continue to play a central role in the digital age."

Schnabel explained that the ECB's strategy is built on two pillars: the Digital Euro, a central bank digital currency (CBDC) for retail users; and Tokenized Central Bank Money, a CBDC for institutional and wholesale markets.

Against the backdrop of former U.S. President Trump pushing for the further mainstreaming of cryptocurrencies, the vast majority of U.S. dollar-pegged stablecoins have seen rapid adoption over the past year. However, some global regulators and financial supervisory bodies have simultaneously warned that stablecoins could pose a potential threat to financial stability.

The stablecoin boom has also raised concerns in Europe. These instruments could gain a foothold in the European market, thereby threatening the European banking system and monetary sovereignty, and sparking discussions about whether Europe needs to launch its own version of a stablecoin.

Bundesbank President Joachim Nagel publicly expressed support for a euro-denominated stablecoin in February of this year, while ECB President Christine Lagarde took a very critical stance in a speech last month.

Schnabel, referencing Lagarde's speech on Monday, emphasized: "Many of the advantages of stablecoins actually stem from the underlying technology they rely on, not the inherent characteristics of the financial instrument itself."

At the same time, she expressed some reservations about the future development prospects of stablecoins. She stated: "In such an environment, it remains to be seen whether stablecoins will find their place in the financial system, much like money market funds did 50 years ago, or whether other forms of innovation—such as tokenized deposits—will prove to be more promising alternatives."

Just one day before Schnabel's remarks, Federal Reserve Governor Christopher Waller stated that the global expansion of stablecoins could amplify the influence of U.S. monetary policy. Waller also questioned the necessity of promoting a central bank digital currency (CBDC), calling a digital central bank currency "a silly idea." This highlights the clear divergence in the digital currency development paths between European and U.S. central banks.

Some officials at the Federal Reserve believe stablecoins can help strengthen the global position of the U.S. dollar, while the European Central Bank is more concerned that stablecoins could weaken monetary sovereignty and policy transmission capabilities, and thus hopes to respond with the Digital Euro.