EUR-Pegged Stablecoins May Challenge USD Dominance by 2028

Fiorenzo Manganiello, a prominent figure at LIAN Group, has asserted that EUR-based stablecoins are poised to challenge the dominance of USD-pegged stablecoins by 2028. This prediction comes amidst a backdrop of significant economic and political shifts that have weakened the U.S. dollar's status as the world's reserve currency.

Since the inauguration of the Trump administration, the U.S. dollar has experienced a decline, falling to a three-year low against a basket of major currencies. This downturn is attributed to a combination of unpredictable trade policies, fiscal mismanagement, and international antagonism, which have collectively undermined the U.S. market. As a result, investors have sought safe-haven assets like gold and, surprisingly, the euro, which has seen a rise in its status as a reserve asset.

In the stablecoin market, USD-pegged coins currently dominate, with Tether holding nearly 70% of the market share. However, Manganiello argues that as the euro gains strength, EUR-pegged stablecoins could become more competitive. Currently, there are 12 prominent euro-pegged stablecoins compared to 56 USD counterparts, but this gap could narrow as the euro continues to strengthen.

The European Union's increasing openness to cryptocurrencies, as evidenced by the finalization of the MiCA framework, provides a regulatory environment that could favor EUR-pegged stablecoins. This framework allows crypto issuers to obtain licenses and operate within the regulated European market, giving EUR-pegged coins an opportunity to strengthen their market share. Additionally, the EU's supportive stance toward crypto issuers, with several major exchanges seeking or receiving EU approval, further bolsters the region's crypto-friendly environment.

Manganiello's prediction is based on the EU's capitalization on the U.S.'s economic missteps and its ambition to achieve a "global euro moment." He believes that as long as the euro remains on its upward trajectory, investments and transactions involving EUR-pegged stablecoins will increase. By the end of Trump's term in 2028, Manganiello expects to see a significant rise in EUR-pegged stablecoins, potentially threatening the dominance of their USD counterparts.

Despite the Bank of International Settlements' concerns about stablecoins posing a financial stability risk, the global market cap of the broader stablecoin ecosystem recently peaked at over $250 billion, indicating their growing popularity and practicality. Manganiello does not foresee the stablecoin market contracting anytime soon, especially given the current economic climate and the EU's proactive approach to digital assets.