European Central Bank President Christine Lagarde has warned that even euro-denominated stablecoins would create risks to financial stability and monetary-policy transmission, questioning whether such digital assets should be introduced in the euro area.

Stablecoins are cryptocurrencies designed to maintain a fixed value by being pegged to fiat currencies like the euro. Lagarde's concerns stem from how widespread stablecoin adoption could bypass traditional banking channels that serve as key transmission mechanisms for the ECB's interest rate decisions.

The comments signal a significant regulatory stance from the ECB as digital asset adoption grows globally. By potentially creating alternative payment rails outside the conventional banking system, stablecoins could complicate the ECB's ability to influence credit conditions and inflation throughout the eurozone economy.

The ECB has been examining various scenarios for central bank digital currencies as a potential response to private digital money innovations.