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As the U.S. takes the lead on stablecoin regulation, not everyone in Europe is cheering. A senior European Central Bank (ECB) official has expressed concern that the growing use of U.S.-backed stablecoins in Europe could increase the region’s financial reliance on the dollar and gradually diminish the euro’s relevance in cross-border payments. In remarks that quickly made waves in policy circles, the unnamed ECB policymaker told Central Banking that large-scale adoption of dollar-pegged stablecoins like USDC and USDT could erode monetary autonomy in the eurozone.
Stablecoins: Trojan Horse or Financial Innovation?
At first glance, stablecoins seem like a straightforward innovation, digital tokens pegged to traditional currencies, designed for faster and more efficient transactions. Yet some policymakers argue they carry broader implications, especially when foreign-denominated tokens begin to substitute local currencies in everyday use. If European users, companies, or even governments begin transacting in U.S. dollar-denominated stablecoins en masse, the euro risks being sidelined in its own backyard.
A senior ECB adviser, Jürgen Schaaf, warned that wider adoption of U.S. dollar–backed stablecoins in Europe risked creating a “parallel dollarized” payment ecosystem that could erode eurozone monetary control over time.
The U.S. Is Moving Faster, And That’s a Problem
With America passing the GENIUS Act, the first national stablecoin law, regulation in the U.S. is starting to catch up with innovation. Meanwhile, the EU’s MiCA (Markets in Crypto-Assets Regulation) regime still treats stablecoins with broad strokes, without fully addressing the risks of foreign-denominated tokens displacing local currency use. In simple terms, American companies like Circle (which runs USDC) and Paxos (behind PayPal’s stablecoin) are expanding with fewer roadblocks, even in Europe. Meanwhile, homegrown European options are still lagging far behind.
What’s at Stake: More Than Just Payments
The concern isn’t just about losing users to a more liquid, tech-savvy dollar, it’s about control. Monetary policy is only effective if people actually use the local currency. If businesses and citizens begin storing value and settling bills in USD-backed stablecoins, the ECB’s ability to manage inflation, interest rates, and credit conditions weakens. It’s not just a European issue either. Latin America, Africa, and Southeast Asia are also seeing organic adoption of stablecoins as inflation hedges and remittance tools. Now, the EU risks being caught in the same tide without the same agility as startups or the dollar’s global brand.
The Digital Euro Dilemma
The ECB has floated plans for a digital euro, but progress has been sluggish. Critics say it’s too conservative, too bureaucratic, and out of step with what users actually want: speed, usability, and interoperability. Meanwhile, the private sector is building fast, frictionless, dollar-backed rails and onboarding millions.
Unless the digital euro gains traction quickly, Europe could find itself in a scenario where Apple Pay runs on USDC before the EU can even issue its own native alternative. This isn’t just about crypto, it’s about who gets to control the future of money.
Stablecoins are emerging as a new layer of global financial infrastructure. If Europe doesn’t build credible euro-denominated options, or tightly regulate the dominance of U.S. tokens, it may lose more than just market share. It could lose leverage.
For now, the dollar’s digital army is marching ahead. Europe, on the other hand, is still debating its next move.
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