MNI BRIEF: Central Bank Money Must Remain Central - Lagarde

Central bank money must remain at the centre of the eurozone financial framework as innovations such as stablecoins are introduced, European Central Bank President Christine Lagarde said on Friday.

While stablecoins could boost demand for euro assets, redemptions can become self-reinforcing when confidence ebbs, while monetary transmission could weaken if deposits migrate into non-bank instruments, Lagarde told a Bank of Spain event according to a prepared text.

“These trade-offs are significant and outweigh the short-term gains in financing conditions and international reach that euro-denominated stablecoins might provide and if we want to strengthen the international appeal of the euro, stablecoins are not an efficient way of doing so," Lagarde said.

“The answer, however, does not lie in rejecting technology or discouraging stablecoins altogether. Instead, we must build the public infrastructure that will enable alternative instruments, such as stablecoins and other forms of tokenised money, to operate within a framework anchored by central bank money.”