Isabel Schnabel of the ECB discusses the evolution of money, comparing money market funds and stablecoins, and explores implications for financial stability, monetary policy, and the international monetary system.
Isabel Schnabel, Member of the Executive Board of the ECB, delivered a speech at the 2026 Bank of Korea International Conference on Central Banks and the Future of Money.
She highlighted that the nature of money has continuously evolved through financial innovation, which impacts the structure of the financial system, stability, and monetary policy.
Stablecoins, privately issued digital tokens pegged to fiat currencies, have risen rapidly, raising questions about their benefits and risks. Schnabel draws parallels with historical innovations like the Bank of Amsterdam’s “bank money” and modern money market funds.
Money market funds, introduced in the 1970s, increased financial market depth and competition but also contributed to bank disintermediation and vulnerabilities to runs, as seen during the financial crises.
Stablecoins share features with money market funds but differ mainly in remuneration and use cases. Despite not paying interest, stablecoins are valued for their potential in payments and settlement, with a market nearing USD 300 billion.
Risks associated with stablecoins include triggering runs, fire sales, and disintermediation of banks. Their reserve assets’ quality and liquidity are critical, with recent events like the March 2023 US dollar stablecoin crisis illustrating these vulnerabilities.
Stablecoins can influence financial conditions and monetary policy transmission. They may tighten or ease financial conditions depending on their use and reserve composition, affecting bank funding costs and liquidity channels.
Furthermore, stablecoins could reinforce the dominance of the US dollar globally, impacting the international monetary order and potentially affecting the euro’s role.
ECB emphasizes that central banks should not resist innovation but regulate stablecoins to mitigate risks. The ECB’s strategy includes developing a digital euro and tokenized wholesale central bank money to preserve monetary sovereignty and foster innovation.
The digital euro aims to ensure access to public money, reduce dependence on non-European providers, and address fragmentation. Projects like Pontes and Appia are advancing tokenized central bank money to support a secure, efficient, and innovative financial ecosystem.
In conclusion, Schnabel stresses that private innovation must be accompanied by appropriate guardrails to safeguard stability, monetary policy effectiveness, and the international role of the euro, ensuring that new private forms of money complement public money.
