Lagarde Warns European Banks That Euro Stablecoins Could Narrow ECB Rate Channel

Lagarde delivered her remarks at the Banco de España Latam Economic Forum in Roda de Bará, Spain. The speech, titled “ Stablecoins and the future of money: separating functions from instruments,” came as the global stablecoin market has grown from under $10 billion six years ago to more than $300 billion today.

“The case for promoting euro-denominated stablecoins is far weaker than it appears,” Lagarde remarked.

The market remains heavily dollar-dominated, with nearly 98% of stablecoins pegged to the U.S. dollar. Tether and Circle control a massive share of that market. The U.S. GENIUS Act, currently advancing through Congress, explicitly frames stablecoin expansion as a tool to cement the dollar’s global dominance and sustain demand for U.S. Treasuries.

Lagarde acknowledged that euro stablecoins operating under the EU’s Markets in Crypto-Assets Regulation (MiCAR), which took effect in 2024, could generate additional demand for euro-area safe assets, compress sovereign yields, and extend the euro’s international reach. She did not dismiss those potential gains outright.

But she argued that two risks make the trade-off unfavorable. The first is financial stability. Stablecoins are private liabilities whose backing can come under sudden pressure during periods of stress. She highlighted that when Silicon Valley Bank (SVB) collapsed in March 2023, Circle disclosed that $3.3 billion of USDC’s reserves were held there. During that window, Lagarde said, USDC briefly traded at $0.877, more than 12 cents below its $1 peg.

“These trade-offs outweigh the short-term gains in financing conditions and international reach that euro-denominated stablecoins might provide,” Lagarde stated during her speech.

The second concern is monetary policy transmission, she explained. In the euro area, banks remain the primary channel through which ECB interest rate decisions reach firms and households. If retail deposits migrate into non-bank stablecoins and return to banks as more expensive wholesale funding, that channel narrows. ECB research published in March 2026 (Working Paper No. 3199) found that large-scale deposit substitution would weaken bank lending and monetary policy pass-through, an effect the paper noted is more pronounced in bank-heavy economies like Europe than in the U.S.

Lagarde’s position puts her at odds with Bundesbank President Joachim Nagel, also an ECB Governing Council member. In a Feb. 16, 2026, keynote at the New Year’s Reception of AmCham Germany, Nagel expressed support for the instruments. “I also see merit in euro-denominated stablecoins, as they can be used for cross-border payments by individuals and firms at low cost,” Nagel explained.

The divergence reflects a broader internal debate within the Eurosystem over how to respond to dollar stablecoin dominance and the risk of what Lagarde called “digital dollarisation.”

Rather than match U.S. stablecoin policy, Lagarde pointed to the Eurosystem’s own infrastructure plans. The Pontes project, launching in September 2026, will link distributed ledger platforms to TARGET, the ECB’s existing settlement system, allowing DLT-based transactions to settle in central bank money. The Appia roadmap, published in March 2026, sets a path to a fully interoperable European tokenized financial ecosystem by 2028.

“Our task is not to replicate instruments developed elsewhere, but to build the foundations and the infrastructure that serve our own objectives, so that we can harness the benefits of innovation without importing the fragilities,” Lagarde said.

European banks and payment firms that have already begun preparing regulated euro stablecoin products under MiCAR may now face added scrutiny as the ECB signals it prefers central bank-anchored solutions over private alternatives.

BIRMINGHAM, Ala. (WBRC) – Alabama Gov. Kay Ivey signed the Cryptocurrency Kiosk Fraud Prevention Act into law this week, putting rules and regulations on cryptocurrency ATMs.

In Hoover, community members have lost more than $800,000 to scammers luring them to crypto kiosks over the last five years. Many of these ATMs are found in places like gas stations or grocery stores.

“A lot of people who are victims of these scams they’re not stupid people. They’re people who are educated and have good jobs, and many times I have lived a very full life. They just fall victim because the scammers know what language to use,” said Capt. Daniel Lowe with the Hoover Police Department.

Under the Cryptocurrency Kiosk Fraud Prevention Act, transactions will be capped, fraud warnings displayed on machines and refund mechanisms set in place for confirmed fraud cases.

“Now that we have some parameters around these kiosks to hopefully prevent some of this fraud, especially the daily limits alone will at least lower the dollar amount that people can put into one of these at one time,” Lowe said.

The law also requires the kiosks to have a customer service line based in the United States. Anyone who violates it can face civil and criminal charges.

“It’s been a really prevalent problem, and we’re glad that our state is taking some steps to help get some parameters on this and hopefully keep our citizens’ money in their pockets because they’ve earned it,” Lowe said.

Police in Hoover do want to remind you that law enforcement would never ask anyone to pay a fine by using cryptocurrency. If someone gets a call asking them to do this, they should hang up and call police.

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Tucker Carlson: ‘Markets Are Doing Things You Would Not Expect Markets to Do’

The comments came against a backdrop that has left many analysts searching for explanations. Operation Epic Fury, the U.S.-Israel military campaign against Iran, launched on February 28, 2026. Strikes hit Iranian leadership and infrastructure. Iran responded with missiles, drones, and disruptions to the Strait of Hormuz, through which roughly 20% of global oil flows.

A fragile ceasefire emerged during the first week of April, but brinkmanship, ship strikes, and intermittent violence have continued into May. Despite all of it, equities climbed. The S&P 500 dropped roughly 10% in the initial weeks, then staged a sharp recovery, closing above 7,000 in mid-April and trading near 7,389 by May 8. The Nasdaq 100 logged a 13-day winning streak, its longest in over a decade. The Dow approached 50,000.

Carlson pointed to oil prices as the clearest sign that something is wrong. “The Strait of Hormuz has been closed for months now, in effect,” he stressed. The political commentator added:

“And yet oil, as of airtime tonight, was under 100 bucks a barrel. Much lower than it was in, say, 2008. That is bizarre. But it’s more than bizarre. It’s fake.”

Brent crude did spike above $116 per barrel on May 5 amid Hormuz threats, but fell back below $100 on any signal of de-escalation. That whipsaw pattern repeated itself throughout the conflict, with traders pricing in a rapid resolution each time.

Gold told a similar story. Prices climbed to the $4,500 to $4,700 range overall but failed to deliver the sustained safe-haven rally many investors expected. Correlations broke. Inflation fears, a stronger dollar, and doubts about rate cuts kept the metal from running.

Bitcoin moved differently. It climbed to $80,000 and then near the $83,000 range, pulled in a record $2 billion in exchange-traded fund (ETF) inflows during April, and outperformed both the S&P 500 and gold in several stretches. Observers called it a digital hedge that absorbed geopolitical risk better than traditional alternatives.

Carlson saw this divergence as evidence of manipulation rather than fundamentals. “Markets are doing things you would not expect markets to do if they were behaving rationally in a free way, if they weren’t rigged,” he said. He argued that gold and oil have stayed “far lower than you would rationally expect them to stay after 60 days of terrible news.”

Wall Street analysts offered competing explanations. JPMorgan directly asked why stocks were hitting record highs without an Iran resolution, then attributed it to corporate earnings strength. Roughly 83% of S&P 500 companies beat estimates in recent quarters. Barclays analyst Stefano Pascale told the New York Times that “the market is trading assuming we have seen the worst of the conflict.”

In the same NYT editorial, ECB President Christine Lagarde called the tendency to assume “business as usual” simply strange. Still, Carlson pushed further. “It’s become too obvious to deny, over the past couple of months, that public markets are not what they told us they were, which is to say, open and free and equal for everyone to participate in,” he said.

He acknowledged retail investors have not fully absorbed this yet, but he suggested the knowledge is spreading. “Some people are getting rich from this, and most people aren’t,” he added. The debate over whether markets are rational or rigged is unlikely to be resolved while the Strait of Hormuz remains contested, inflation risks linger, and ceasefire terms stay unfinished.

History suggests equity markets tend to recover through geopolitical conflict. But history has shown some of the greatest crashes following irrational all-time highs. Whether any of these episodes fit historical patterns depends on what happens next.