The European Central Bank (ECB) has opposed proposals to ease reserve requirements for euro-denominated stablecoins, citing potential risks to bank funding and monetary policy control. During a finance ministers meeting in Cyprus, ECB officials warned that wider adoption of stablecoins could weaken bank lending capacity and destabilize commercial bank funding structures. The debate comes amid concerns over digital dollarization as European policymakers seek to compete with dollar-backed digital assets. Proposals presented by Bruegel at the Economic and Financial Affairs Council meeting suggested easing liquidity requirements for stablecoin issuers and granting access to ECB funding facilities. However, ECB President Christine Lagarde and other officials rejected these proposals, fearing that they could lead to larger redemption waves during market stress and increase liquidity mismatches. The ECB's stance reflects broader European hesitance towards privately issued digital money, with policymakers favoring tokenized wholesale settlement systems linked to central bank infrastructure over privately managed stablecoin ecosystems.