How Euro stablecoins could help address the EU’s Dollar dependence
European Central Bank officials are increasingly worried that the growing popularity of U.S. dollar-backed stablecoins could undermine their ability to steer monetary policy. As dollar-based assets continue to dominate the digital currency market, European stablecoin issuers say they have their own ideas for how to fix the problem — and they don’t believe a digital euro will arrive in time or be the right solution.
The ECB’s warning: stablecoin dollarization could weaken policy tools
The stablecoin market has exploded over the past year, driven largely by clearer regulations in the United States. Market capitalization is hitting new records every month. But this surge has raised concerns among policymakers at the European Central Bank, who fear that if Europeans increasingly rely on dollar-based stablecoins during times of financial stress, the ECB’s influence could diminish.
In July 2025, Jürgen Schaaf, an adviser in the ECB’s market infrastructure and payments division, warned that widespread use of U.S. dollar stablecoins in Europe could mirror what happens in dollarized economies. As he explained, when people switch to assets they view as safer or higher-yielding than euro products, the central bank’s control over monetary conditions can erode.
Several regulators have also raised concerns about financial stability. Earlier this week, Olaf Sleijpen, governor of De Nederlandsche Bank, told the Financial Times that if U.S. stablecoins keep growing, “they will become systemically relevant.” A major run on such assets, he said, could force the ECB to rethink its entire approach to monetary policy.
Right now, dollar-backed stablecoins dominate overwhelmingly. Schaaf noted that around 99% of the roughly $300 billion stablecoin market is tied to the U.S. dollar, while euro-backed assets barely reach €350 million (about $405 million). Although some European initiatives are emerging — including potential moves by banks — the scale remains small.
Why dollar-backed stablecoins took the lead
Gísli Kristjánsson, CEO of Monerium — a stablecoin issuer offering tokens backed by multiple currencies including the euro, pound, dollar and Icelandic króna — said the early boom in stablecoins was mostly driven by crypto exchanges that lacked traditional banking access. Because the dollar quickly became the default currency for crypto trading, USD stablecoins naturally became the industry standard.
He also pointed out that in regions with weaker local currencies, savers have long gravitated toward the dollar as a safe, globally trusted store of value. But he believes euro-backed alternatives can narrow the gap — if developers create real-world use cases that appeal to everyday users, not just crypto traders.
Kristjánsson expects major progress by 2026, with more businesses interested in using euro stablecoins for payments and workers converting dollar-pegged salaries into assets they can more easily spend in Europe. If the EU wants to protect the euro’s role, he argues, then building a strong euro-denominated stablecoin ecosystem is the best strategy.
Schaaf echoed this, noting that U.S. stablecoins will keep their early lead unless credible euro-based alternatives emerge.
Private stablecoins vs. a digital euro
A key debate is whether Europe should rely on privately issued stablecoins or a central bank digital currency (CBDC) to counter dollar dominance.
The ECB has been developing a digital euro since 2020. The project is slowly moving through research, consultations, and legislative preparation. The goal, according to the ECB, is to reduce reliance on non-European payment providers, unify Europe’s fragmented payments systems, and encourage innovation.
But stablecoin issuers are skeptical.
Andrew MacKenzie, founder of the UK-based issuer Agant, said most CBDC proposals have been too limited, poorly designed, or disconnected from practical user needs. He argued that digital euros may struggle to match the accessibility and global reach that major private stablecoins already offer — and warned that government digital currency projects often get bogged down by bureaucracy, political arguments, and procurement issues.
Kristjánsson added that the expected 2029 launch of a digital euro may simply be too late. Key decisions, like whether it will use blockchain technology, remain unclear. Proposed limits on how much users could hold would also undermine many of the benefits that make stablecoins useful, such as scalability and decentralized access.
He also believes that framing the digital euro as a competitor distracts from the growth of European stablecoins, which he argues could solve the ECB’s concerns more effectively. “The ECB is not being helpful in that respect,” he said.
Working together — not against each other
Even with disagreements, stablecoin issuers say cooperation is possible. MacKenzie noted that stablecoins are closely linked to the traditional banking system because issuers hold their reserves in fiat assets like commercial bank deposits. He also pointed to the Bank of England’s recent proposal to offer liquidity support to stablecoin issuers.
Central banks, he said, will continue to play a crucial role in payments infrastructure. For stablecoins, new forms of collaboration may emerge.
Ultimately, whether Europe’s digital future is shaped by private stablecoins, a digital euro, or some combination of the two, one thing is clear: the EU’s monetary sovereignty will depend on how effectively it builds and supports trusted digital money.
