ECB's tough stance this time, preferring to watch the euro stablecoin fail rather than loosen up, fearing deposit withdrawals and bank losses. Bruegel's idea of 'central bank backstop liquidity' sounds like a lifeline, but in reality, it shifts all the risks onto the euro system, no wonder Lagarde isn't convinced.

ECB refuses to relax stablecoin regulation, citing high risks and potential harm to financial stability and transmission. Bruegel proposed at the Nicosia meeting to lower issuer liquidity requirements, and if necessary, have the ECB provide funding to counter dollar dominance and avoid digital dollarization; but several central bank officials opposed, worried that stablecoins could disrupt deposits, increase financing costs, and weaken lending. The EU regulates under MiCAR, while the USD GENIUS Act takes a more lenient approach; euro stablecoins account for only 0.3% of the global market, and Europe is also promoting a digital euro to enhance payment sovereignty.