The European Central Bank rebuffed a proposal Friday that would have eased liquidity requirements for euro stablecoin issuers and opened a path for them to tap ECB liquidity, according to a Reuters report citing three people familiar with the closed-door discussions.
The pitch came from a policy brief by Brussels think tank Bruegel, presented to EU finance ministers and central bank governors at a two-day informal meeting in Nicosia, Cyprus. The authors, Lucrezia Reichlin, Bo Sangers, and Jeromin Zettelmeyer, argued that more permissive rules and a backstop from the ECB are needed to grow a euro stablecoin market that remains a rounding error in a sector dominated by dollar tokens, per Reuters.
ECB President Christine Lagarde and several other central bankers pushed back on the proposal in the room, according to the report. They argued that letting stablecoin issuers pull deposits out of European banks at scale would raise lenders' funding costs and curb their capacity to extend credit, Reuters said.
Several officials also balked at the idea of turning the ECB into a backstop for stablecoin firms, a role traditionally limited to supervised banks, per the report. Finance ministers themselves were reportedly split on the proposal.
