ECB Adviser Proposes Euro Stablecoins to Counter USD Stablecoin Dominance

A senior European Central Bank (ECB) adviser has argued that euro stablecoins could offer a more effective strategy than a standalone digital euro to counter the growing dominance of U.S. dollar-based stablecoins. Jürgen Schaaf, a member of the ECB’s advisory board, outlined his views in a blog post, emphasizing the need for a multifaceted approach to address the challenges posed by dollar-pegged tokens like Tether (USDT) and USD Coin (USDC), which collectively hold over $120 billion in circulation [1]. Schaaf warned that relying solely on the ECB’s digital euro project may not suffice, as private-sector euro stablecoins could gain traction more quickly due to their market-driven flexibility.

Schaaf’s analysis highlights the ECB’s concerns about systemic risks associated with dollar stablecoins, which facilitate cross-border transactions outside traditional banking systems and EU regulatory frameworks [2]. He stressed that such tokens could undermine the ECB’s ability to implement monetary policy effectively, particularly in sectors like e-commerce and remittances, where dollar-pegged stablecoins already have a strong foothold. This dynamic, he noted, could erode the eurozone’s financial autonomy and global influence.

While the ECB continues developing a digital euro, its adoption has faced hurdles. Despite the bloc’s MiCA (Markets in Crypto-Assets) regulatory framework, euro-pegged stablecoins remain marginal in circulation, according to Bank of Italy Governor Fabio Panetta. Meanwhile, the U.S. has accelerated efforts to bolster dollar-based stablecoins, with President Trump signing an executive order in January to strengthen American financial leadership [1]. The EU’s reliance on U.S. payment giants like Visa and Mastercard has also been cited as a strategic vulnerability, exposing the bloc to geopolitical risks in transatlantic relations.

Schaaf proposed a hybrid strategy combining the digital euro with private innovation and distributed ledger technology (DLT). He cited ECB-backed pilot projects such as Pontes and Appia, which aim to explore DLT’s potential in wholesale and cross-border payments [1]. By leveraging private-sector expertise while ensuring regulatory compliance, euro stablecoins could bridge the gap between central bank-backed currencies and market-driven solutions. This approach, he argued, would require collaboration among regulators, financial institutions, and fintech firms to create stablecoins that align with EU standards and global competitiveness.

The ECB’s delayed timeline for the digital euro has raised questions about its ability to compete. A final decision on launching the digital euro is not expected until late 2025, with a potential rollout as early as 2027 or 2028. Critics suggest that the EU’s cautious stance has created an opportunity for dollar stablecoins to dominate the market, particularly as the MiCA framework has yet to produce a competitive alternative [3]. The ECB’s focus on maintaining price and financial stability may also clash with the agile, fast-moving nature of stablecoin ecosystems.

Schaaf’s call for euro stablecoins reflects a pragmatic acknowledgment of market realities. He cautioned that a strategic blind spot in addressing dollar-backed assets could prove costly for the eurozone. The EU’s response, he argued, must balance innovation with regulatory rigor to avoid ceding ground to U.S. financial technology. The implications extend beyond the eurozone, as the rise of dollar stablecoins has sparked debates in the U.S. about whether the Federal Reserve should issue its own CBDC to rival China’s e-CNY [4]. The EU’s approach could influence the global digital currency landscape, either reinforcing the dollar’s dominance or diversifying it with alternative models.

Challenges in developing a competitive euro stablecoin ecosystem remain significant. Regulatory fragmentation across EU member states, cybersecurity risks, and liquidity management are critical hurdles. Additionally, aligning the ECB’s policy goals with the dynamic needs of stablecoin markets will require careful calibration. The success of non-Eurozone initiatives, such as India’s private-sector stablecoins, underscores the importance of adapting to regional economic and technological contexts [5].

As the EU weighs its options, Schaaf’s emphasis on euro stablecoins signals a shift toward a more flexible, market-responsive strategy. The ECB’s next steps will involve balancing innovation with monetary policy integrity, ensuring the eurozone remains a key player in the evolving digital finance arena.

Source: [1] [Digital Euro No Silver Bullet to USD Stablecoins: ECB Adviser Jürgen Schaaf] [https://cointelegraph.com/news/digital-euro-alone-curb-usd-stablecoin-rise-ecb-adviser]

[2] [Dollar stablecoins threaten Europe's monetary autonomy, ECB blog argues] [https://www.marketscreener.com/news/aryzta-group-anti-bribery-and-corruption-policy-304-36-kb-ce7c5fd8dd81f421]

[3] [French Trade Minister Laurent Saint-Martin says that more work is needed in the area of digital services as part of the EU-U.S. framework trade deal] [https://www.reddit.com/r/wallstreetbetsHUZZAH/comments/1mavz3w/what_are_your_moves_tomorrow_july_28_2025/]

[4] [Stablecoins are reshaping global finance – with the US dollar at the helm] [https://www.bankingpressreleases.com/]

[5] [Banking Press Releases] [https://www.bankingpressreleases.com/]