EU Urged to Develop Euro Stablecoins to Counter U.S. Dollar Dominance

European policymakers are calling for the creation of euro-denominated stablecoins to reduce the bloc’s dependence on U.S. dollar-based digital assets. Pierre Gramegna, managing director of the European Stability Mechanism (ESM), emphasized the need for Europe to foster financial innovation in the fast-growing stablecoin market, which remains heavily dominated by dollar-backed tokens.

Speaking at a hearing on the eurozone’s economic outlook, Gramegna said Europe must adapt to the rapidly changing financial environment. “Europe should not be dependent on U.S. dollar-denominated stablecoins, which are currently dominating markets,” he stated. 

He urged the EU to “facilitate the generation of euro-denominated stablecoins by domestic issuers,” adding that stablecoins and tokenized assets represent an “inevitable” part of the continent’s financial future.

EU Looks to Regain Digital Financial Ground

Paschal Donohoe, president of the Eurogroup, echoed the need for innovation but also highlighted the potential of the digital euro, a central bank digital currency (CBDC), to enhance commerce across the region. 

EU officials noted that the surge in dollar-denominated stablecoins, boosted by the U.S. GENIUS regulatory framework, has underscored the urgency for Europe to develop its own competitive alternatives.

This marks a notable shift in tone from earlier EU rhetoric that focused primarily on the systemic risks posed by privately issued stablecoins. Now, policymakers appear more open to the idea that well-regulated euro stablecoins could strengthen the region’s financial sovereignty and competitiveness.

However, despite growing momentum, a digital euro launch remains years away. Piero Cipollone, a member of the European Central Bank (ECB) board, said that the CBDC is unlikely to debut before 2029, citing delays in legislative processes. Cipollone has long been an advocate for the digital euro, arguing that it is crucial to safeguard the stability of the EU’s monetary system against the rise of private digital currencies.

A Geopolitical Battle for Currency Influence

The debate over stablecoins has evolved into a geostrategic issue, with major economies racing to digitize their national currencies. Christine Lagarde, ECB president, recently warned that foreign stablecoins could “drain liquidity out of the euro” if left unchecked, urging regulators to close loopholes that favor non-EU issuers.

Meanwhile, across the Atlantic, U.S. Federal Reserve Governor Christopher Waller continues to champion dollar-backed stablecoins as a tool to reinforce the dollar’s global dominance. “Crypto-assets are de facto traded in U.S. dollars,” Waller noted, suggesting that expanding digital finance could further entrench the dollar’s supremacy—a scenario European officials are increasingly determined to counter.