European Union Finance Ministers and central bank governors discussed on Friday the growing risks posed by stablecoins and other digital finance innovations, with Cyprus’ Finance Minister Makis Keravnos warning that their expanding use in cross-border payments could create vulnerabilities for the banking system and financial stability.
Opening the first working session of the informal ECOFIN meeting in Nicosia, Keravnos said the financial sector was evolving rapidly under the impact of new technologies, making stablecoins an increasingly important element of the global payments landscape.
“Despite the opportunities they offer as a means of cross-border payments, the use of stablecoins entails substantial risks and should be addressed,” he said.
Keravnos said the Eurogroup had already established a dedicated workstream to examine the implications of digital finance innovations, including stablecoins, tokenisation and digital payments, as policymakers seek to assess whether adjustments to Europe’s policy framework may eventually be required.
According to the issue note prepared by the Cypriot presidency for Friday’s discussions, stablecoins still play a relatively modest role in the global economy and are used mainly for crypto trading, although their use in cross-border payments is gradually expanding.
The paper warned, however, that broader adoption could generate significant risks, including redemption pressures that could trigger “stablecoin runs”, operational vulnerabilities and potential spillover effects for the banking sector.
The note also outlined possible European regulatory and infrastructure responses aimed at safeguarding financial resilience in an increasingly tokenised digital asset ecosystem.
Friday’s discussion brought together EU Finance Ministers, central bank governors, the President of the European Central Bank and the chair of the European Parliament’s ECON committee and other heads of European organisations.
Patsalides stresses the need for a coordinated European strategy
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Meanwhile Governor of Cyprus Central Bank Christodoulos Patsalides said geopolitical developments were weighing on economic growth and inflation, stressing the need for a coordinated European strategy to address mounting global economic challenges.
Speaking ahead of the informal ECOFIN, the Governor of the Central Bank of Cyprus said participants would discuss the challenges facing European economies amid heightened geopolitical uncertainty.
“We are going through a difficult period,” Patsalides said, adding that global developments were “certainly affecting economies”, both in terms of growth prospects and inflationary pressures.
He said the ECOFIN meetings aimed to facilitate exchanges of views and conclusions that could help shape a common European approach to tackling the challenges.
