ECB Warns Europe Risks Ceding Sovereignty to USD Stablecoins Dominating 99% of $230B Market

A senior European Central Bank (ECB) advisor has issued a stark warning that Europe risks ceding monetary sovereignty to U.S.-dollar-backed stablecoins, which dominate 99% of the $230 billion global stablecoin market while euro-backed alternatives capture just 0.15%. Jürgen Schaaf, writing in an official ECB blog post on July 28, highlighted the growing threat posed by the dominance of tokens like Tether’s USDT and Circle’s USDC, which have entrenched themselves in global finance. Euro-denominated stablecoins remain stuck below €350 million in total value, underscoring Europe’s struggle to compete [1].

Schaaf identified multiple pathways through which dollar stablecoins could undermine European financial control. Their integration into mainstream payment systems via U.S. networks like Visa and Mastercard, coupled with adoption by major retailers such as Walmart and Amazon, could shift payment flows away from traditional banking infrastructure. The ECB advisor also raised concerns about interest-bearing stablecoins, which might siphon deposits from European banks, threatening their ability to refinance operations. Additionally, stablecoins are increasingly used in decentralized finance, tokenized asset settlements, and cross-border payments, leveraging speed and network effects to outpace regional alternatives [1].

The ECB’s digital euro project, Schaaf argued, is critical to defending European monetary sovereignty. However, Europe’s market response remains limited. The EURAU stablecoin, a collaboration between Deutsche Bank, Galaxy Digital, and Flow Traders, represents the first MiCA-compliant euro token but has yet to gain significant traction. Meanwhile, the U.S. has reinforced dollar advantages through the GENIUS Act, while China and Asian economies are advancing their own regulatory frameworks for stablecoins. The International Monetary Fund (IMF) has separately flagged uncertainties around stablecoin classification, noting unresolved debates over whether they should be treated as currencies or financial assets [1].

Global competition for digital monetary dominance is intensifying, with the U.S., China, and others prioritizing strategies to extend their influence. Schaaf emphasized that the U.S. administration’s support for stablecoins extends beyond innovation to safeguarding the dollar’s role in global commerce. Europe’s challenge, he noted, is compounded by the difficulty of overcoming network effects and first-mover advantages in digital payments, leaving the continent’s ability to catch up uncertain [1].

Source: [1] Is Europe Losing the Stablecoin War? ECB Advisor Warns Yes (https://cryptonews.com/news/is-europe-losing-the-stablecoin-war-ecb-advisor-warns-yes/)