With the US pushing ahead on stablecoin regulation and adoption, European policymakers face mounting pressure to defend the euro’s role in global digital finance.
An official from the European Central Bank has raised concerns about the growing dominance of US dollar-based stablecoins and the mounting pressure this places on European monetary sovereignty.
“The global market is increasingly dominated by US dollar-based stablecoins. These account for some 99% of total stablecoin market capitalisation,” Jürgen Schaaf, Advisor – Infrastructure and Payments, wrote in a blogpost.
“In contrast, euro-denominated stablecoins remain marginal – with market capitalisation of less than €350 million.”
This dominance can largely be attributed to the US’ determination to pass stablecoin legislation. On July 18, US President Donald Trump signed the GENIUS Act into law, introducing a nationwide regulatory framework for stablecoins.
According to Schaaf, market analysts believe this will spark an explosion in stablecoin issuance, predicting the market could balloon from $230bn today to $2trn by the end of 2028.
Stuck between disruption and dependency
Europe’s dilemma is becoming harder to ignore. It can either double down on euro-backed stablecoins, even if that means unsettling the traditional banking model; or risk seeing the euro further sidelined as the US dollar cements its lead in global digital finance.
Schaaf warns that dollar-based stablecoins are no longer confined to crypto circles. If their influence keeps growing, they could start to displace the euro not just in digital markets, but in everyday payments and settlements too. The backing of major US corporations only deepens the challenge.
“On the payments front, stablecoin adoption is gaining traction in remittances and e-commerce,” he noted.
“Major US card schemes (Visa and Mastercard) are already integrating stablecoins into their global offerings. Similarly, some of the biggest merchants in the United States (Walmart and Amazon) are exploring the use of stablecoins.”
Europe has already made efforts to reduce its reliance on Visa and Mastercard as part of broader digital sovereignty ambitions.
Europe must act
Despite Schaaf’s measured tone, he stressed: “Europe must take decisive action to emerge stronger from these turbulent times.”
He outlined several policy options, including more active support for euro-denominated stablecoins, arguing that if properly designed, they could meet market needs and reinforce the international role of the euro.
Schaaf also noted the importance of the digital euro project, which is still in development, and sees it as “a robust line of defence of European monetary sovereignty.”
Another area he highlighted is distributed ledger technology (DLT) in wholesale finance. Schaaf pointed to the ECB’s Pontes and Appia initiatives, which aim to integrate DLT with central bank money for settlement of tokenised assets and cross-border transactions.
Finally, Schaaf called for stronger global coordination on regulation. Without aligned rules, he warned, “we risk fuelling instability, regulatory arbitrage and global US dollar dominance.”
