Stablecoin adoption could heighten risks to financial stability, and central banks must respond with robust regulation and central bank digital currencies (CBDCs), such as the digital euro, to preserve the anchoring role of central bank money, according to Isabel Schnabel, a European Central Bank board member.

During a Monday speech at the 2026 Bank of Korea International Conference in Seoul, Schnabel said that the global stablecoin market cap has expanded swiftly and that stablecoins pose risks to financial stability, monetary policy, and the international monetary order.

"Due to their liquidity mismatch and a potential loss of trust in the quality of the assets, they are also subject to the risk of runs," said Schnabel.

The ECB official warned that dollar-denominated stablecoins risk cementing USD dominance through network effects, potentially amplifying the "international transmission of U.S. monetary policy," while euro-pegged stablecoins remain marginal.

"The growing use of stablecoins may further cement the international dominance of the U.S. dollar," said Schnabel. "Today, virtually all stablecoins in circulation are denominated in dollars, with other currencies playing a negligible role."

According to Schnabel, the global stablecoin market cap has increased to nearly $300 billion, although growth has moderated recently. Tether's USDT and Circle's USDC continue to dominate the sector, accounting for roughly 90% of the total market.

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Digital euro

Despite the risks, Schnabel suggested that central banks should not resist innovation but provide guardrails.

"The appropriate response is therefore not to resist innovation but to ensure that it develops within a framework that preserves stability, monetary control and trust in the currency," said Schnabel.

For Europe, Schnabel argued that the digital euro is essential as a retail CBDC. She said that the digital euro could preserve citizens' access to public money, while strengthening European strategic autonomy by reducing its dependence on non-European payment providers.

The digital euro could also provide a pan-European payment solution with legal tender status and reduce fragmentation in the European payments landscape, she said.

"We also need to provide guardrails to preserve financial stability, monetary policy transmission and the international role of the euro," Schnabel added.

Schnabel's remarks contrast with the stance of the current U.S. administration on CBDCs. U.S. Treasury Secretary Scott Bessent reiterated last week that the current administration will not allow a CBDC, while urging Congress to get the Clarity Act to the finish line.

The digital euro is currently in a technical preparation phase, and the ECB aims to be ready for a potential initial issuance by 2029, assuming the digital euro regulation is adopted in 2026, according to the ECB's website.

Coinbase weighs in

Meanwhile, Katie Harries, Coinbase's director of international policy, praised the European Union's Markets in Crypto-Assets (MiCA) framework as a good foundation, but called for targeted adjustments in the upcoming review to make Europe's crypto markets more competitive.

In a Monday blog post, Harries suggested the European Commission use the upcoming MiCA review to strengthen Europe's competitiveness in crypto. Her recommendations include making euro stablecoins more viable, clarifying regulated access to DeFi, preserving global liquidity, and taking a more ambitious approach to tokenization.

Coinbase obtained a MiCA license in Luxembourg in June 2025, allowing it to passport crypto services across the European Union.

"But its strong position cannot be taken for granted," said Harries. "If the EU wants to remain competitive, it should use this review to position the bloc competitively in the next phase of digital asset regulation and as an opportunity to deepen innovation and investment."

The European Commission has begun a formal evaluation of MiCA and opened a public consultation through Aug. 31, 2026.

Harries also criticized the current reserve requirements for stablecoin issuers, which mandate that 30% to 60% of reserves be held in commercial bank deposits, arguing that the current framework "concentrates rather than diversifies risk."

"Allowing a greater share to be held in high-quality sovereign assets would reduce systemic vulnerability without compromising safety," she said.

Harries also said that MiCA should allow non-interest incentives such as cashback, loyalty points, and other activity-based rewards. 

"These are standard features across payments, are separate from the backing assets, and matter for customer retention and competition," Harries added.