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- USD-backed stablecoins make up 99% of the global market, raising ECB concerns over euro sovereignty.
- Issuers argue that robust euro stablecoins—not a slow-moving CBDC—are the best antidote to dollarization.
- The digital euro’s 2029 timeline may be too late to counter current market trends.
European policymakers are sounding alarms as the rapid expansion of dollar-backed stablecoins threatens to dilute the euro’s influence in digital finance. While the global stablecoin market continues to reach new all-time highs, officials at the European Central Bank (ECB) argue that the trend could undermine monetary sovereignty at a critical moment for the region.
ECB Fears Dollarization in Digital Finance
Concerns intensified after ECB adviser Jürgen Schaaf warned that Europe could begin to mirror partially dollarized economies if USD-backed stablecoins continue to dominate. With 99% of the roughly $300 billion stablecoin market tied to the U.S. dollar, euro-based alternatives remain nearly invisible, accounting for only about €350 million.
According to Schaaf, European users increasingly seek the perceived safety, liquidity, and yield advantages offered by dollar-denominated coins—advantages euro financial instruments have struggled to match. In a crisis scenario, this dynamic could weaken the ECB’s ability to implement effective monetary policy.
Dutch central bank governor Olaf Sleijpen echoed this, suggesting that expanding USD stablecoins could become “systemically relevant,” forcing the ECB to reassess policy options if a market disruption or stablecoin run occurs.
Stablecoin Issuers Push for a Strong Euro-Based Ecosystem
Issuers of euro- and pound-backed coins agree on the risks but argue that a competitive European stablecoin market—not a rushed central bank digital currency (CBDC)—offers the most practical solution.
Monerium CEO Gísli Kristjánsson said the dominance of USD stablecoins stemmed from early crypto exchange infrastructure, where the dollar served as the primary pricing currency. Still, he believes euro-backed coins could close the adoption gap once real-world applications expand beyond speculative trading.
Kristjánsson expects new use cases—especially in payments and salary conversions—to accelerate by 2026, strengthening the euro’s relevance in digital commerce.
CBDC Debate: A Solution or a Distraction?
The ECB’s digital euro project, targeting a 2029 rollout, faces skepticism from stablecoin issuers. Critics argue that CBDCs lack the flexibility, interoperability, and user-friendly design required for global adoption. Caps on holdings, unclear technical frameworks, and bureaucratic delays could limit effectiveness.
Agant founder Andrew MacKenzie warned that central bank-issued digital money may be too slow, too restrictive, and too politically entangled to counter the dollar’s stronghold.
Also Read: ECB Proposes Digital Euro to Challenge Trump’s Stablecoin Strategy in Global Crypto Race
As the digital economy accelerates, Europe faces a pivotal choice: nurture a robust private stablecoin sector or risk deepening dependence on U.S. dollar assets. Whether through a digital euro, euro-pegged stablecoins, or a hybrid approach, the continent’s monetary sovereignty will depend on the solutions it deploys over the next several years.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
