The European Central Bank (ECB) has voiced growing concern that U.S. dollar-backed stablecoins could weaken its ability to guide monetary policy. As the stablecoin market expands rapidly—driven by regulatory clarity in the United States—EU officials fear greater reliance on dollar-based digital assets during times of financial stress.
Stablecoin issuers in Europe share these concerns, but they argue that proposals such as a digital euro will not arrive quickly enough. They also question whether a central bank digital currency (CBDC) is the right solution, suggesting that a strong ecosystem of euro-denominated stablecoins would better counter rising dollar dominance.
ECB warns of monetary policy risks
In July 2025, Jürgen Schaaf of the ECB’s market infrastructure division said rising use of U.S. dollar stablecoins in Europe could mirror developments seen in dollarized economies. He warned that the ECB’s “control over monetary conditions could be weakened,” especially if users look for perceived safety or higher yields not available in euro-based instruments.
Dutch central bank governor Olaf Sleijpen echoed these concerns, saying U.S. stablecoins could eventually become “systemically relevant.” At that point, a large-scale stablecoin run could force the ECB to reconsider parts of its monetary policy framework.
Today, the vast majority of stablecoins are dollar-backed. About 99% of the global $300 billion market is tied to the U.S. dollar, while euro-backed stablecoins amount to only €350 million.
Why euro stablecoins lag behind
Gísli Kristjánsson, CEO of Monerium, said early stablecoin adoption was driven by crypto exchanges without access to traditional banking. The dollar quickly became the default currency for both traders and savers, reinforcing USD dominance.
He noted that euro-backed stablecoins have struggled because mainstream, real-world use cases are still limited outside of crypto trading. However, Kristjánsson expects stronger adoption by 2026 as new payment use cases and salary conversions into euro-backed stablecoins increase.
He argued that supporting European stablecoin development is the most effective way to strengthen the euro’s role in the digital economy. Schaaf agreed that U.S. dollar stablecoins may retain their lead unless credible euro alternatives emerge soon.
Why not rely solely on CBDCs?
The ECB has been developing a digital euro since 2020. The initiative aims to reduce dependence on non-European payment providers and modernize Europe’s financial infrastructure. The proposal is expected to reach EU lawmakers in 2026.
But stablecoin issuers doubt that CBDCs alone can address the bloc’s challenges. Andrew MacKenzie of Agant said most CBDC proposals lack functionality, accessibility, and global interoperability. He also warned that CBDCs could get bogged down by politics and bureaucracy.
Kristjánsson added that a digital euro—expected no earlier than 2029—may arrive too late to counter U.S. stablecoin dominance. Uncertainties about its technology, design, and holding limits could further reduce its usefulness.
He also argued that a digital euro competes directly with private stablecoins, diverting attention from a European industry that could more effectively strengthen the euro’s digital presence.
Coexistence between central banks and stablecoins
Despite disagreements, collaboration remains possible. MacKenzie noted that stablecoins are tightly linked to the traditional banking system, with issuers holding reserves in bank deposits and other fiat-based assets. He highlighted the Bank of England’s recent steps to offer liquidity support to stablecoin issuers as an example of productive cooperation.
Ultimately, whether through private euro-backed stablecoins or a digital euro overseen by the ECB, Europe’s monetary sovereignty in the digital age will depend on developing a credible alternative to dollar-based digital assets.
