ECB’s Villeroy Says “Agile Pragmatism” Will Also Guide Digital-Euro Push, Warns on Stablecoins

6 January 2026

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Tuesday said two “major upheavals” — tokenization and geopolitics — are reshaping the international monetary landscape, with implications for monetary policy and financial stability.

Speaking at a G7-IMS conference in Paris, Villeroy, who heads the Banque de France, argued that policymakers should aim for what he called a “compatibility triangle” of “sovereignty, seamless payment systems, and stability.”

On the technology shock, Villeroy said tokenization could “revolutionize cross-border payments” and potentially domestic payments, but warned it could also reinforce the dollar’s role via dollar-backed stablecoins held outside the United States.

Stablecoins are “99% pegged to the US dollar to date,” he said, citing projections that market capitalization could reach $500 billion to $2 trillion by 2028, while stressing that the wide range highlighted uncertainty over how far stablecoins might spread beyond crypto markets and cross-border uses.

At the same time, he argued that cheaper cross-border payments could weaken the dollar’s international role by enabling more transactions in other currencies or in stablecoins pegged to other currencies.

Turning to geopolitics, Villeroy said the international monetary system remained dollar-dominated despite a multipolar global economy, but contended recent US actions had “weakened some pillars of dollar dominance.”

He cited steps “attacking the independence of the Fed,” doubts about US fiscal discipline, and tariffs that reduce US integration into the global economy, adding that concerns about dollar payments being used for coercion were encouraging alternative payment systems.

Villeroy also pointed to a 5 percentage point decline in the dollar’s share of allocated official reserves between the second quarter of 2020 and the second quarter of 2025, and cited a temporary decoupling between EUR/USD and the two-year rate spread after the US tariff announcement of April 2, 2025.

On the policy response, he said Europe must secure the role of “sovereign” central bank money in the digital world, backing a retail digital euro — a “digital note+” — alongside a wholesale CBDC to support settlement of tokenized assets.

Financial stability risks from stablecoins warranted tougher safeguards, he said, calling for strengthening the EU’s MiCA framework, including restrictions on retail use of stablecoins “particularly when they are pegged to a currency other than the euro,” and tighter limits on “multi-issuance” inside and outside the EU.

Concluding, he called for “pragmatic, not ideological, public-private partnerships,” adding: “‘Agile pragmatism’ is my preferred motto in monetary policy.”