Euro Stablecoins Could Become More Strategically Important Than Digital Euro
A central bank digital currency (CBDC) alone will not be enough to combat the rise of US dollar-pegged stablecoins, an adviser to the European Central Bank (ECB) has said. Writing in a blog post published on Monday, Schaaf argued that the European Union will need to lean more heavily on regulated euro-pegged stablecoins if it is to preserve its monetary sovereignty.
He added that the digital euro, while a great project, must be one part of a broader payments strategy that includes distributed ledger technology (DLT) and additional support for private sector innovation.
Regulated Euro-Pegged Stablecoins Take Center Stage
Schaaf’s blog post pointed out that tightly regulated euro-denominated stablecoins could be the EU’s “first lever” in responding to the global dominance of dollar-based stablecoins.
Euro-denominated stablecoins, held to high design benchmarks and strong risk mitigation, have the potential to address legitimate market needs. They can also enhance the international role of the euro,” Schaaf wrote.
Despite regulatory efforts, euro stablecoins have yet to see broad uptake. ECB policymakers, including former board member Fabio Panetta, have previously cited the digital euro as one of the most significant tools for boosting adoption, though Schaaf suggests that stablecoins could be even more critical in the short term.
Digital Euro Seen as One Pillar of a Broader Strategy
Admitting the importance of the digital euro, Schaaf added that it should not be viewed as the only EU solution. Instead, it should supplement private innovation and infrastructure development.
“In payments at the point of interaction, the digital euro can be a robust line of defence of European monetary sovereignty,” he said.
Schaaf also remarked on the possibility of using DLT to improve wholesale and cross-border payments. In early July, the ECB approved two pilot projects — Pontes and Appia — aimed at exploring these technologies for improving the financial infrastructure of Europe.
Global Coordination and Regulation Disparities
Schaaf also pointed out differences between the US GENIUS Act and the EU’s MiCA regime, calling for greater international coordination on stablecoin regulation. He warned that regulatory divergence will be costly if Europe does not act decisively.
This is amid increasing concerns in the EU after a pledge by the US to boost the global status of the US dollar via stablecoin technology, with President Biden in January having signed an executive order to that effect.
Decision on Next Digital Euro Expected by End of 2025
The ECB accelerated the digital euro to its “preparation phase” in November 2023, but no final decision has been made to introduce it. As suggested by the central bank, its Governing Council will decide that by the end of 2025.
ECB President Christine Lagarde restated the institution’s commitment to the digital euro in her July press conference, while other officials consider complementary steps to protect the eurozone’s financial sovereignty as US digital hegemony rises.
