The digital euro is not an answer to U.S. stablecoins

Since Meta (formerly Facebook) announced its own stablecoin “Libra” in 2019, concerns have been growing in Europe about the increasing influence of non-European, privately issued monetary innovations. Alongside fears of negative geopolitical implications, risks to financial stability have also come into focus. Although Meta’s project was never implemented, a dynamically growing stablecoin market has emerged. Today, U.S. dollar–denominated stablecoins clearly dominate this market. In particular, Tether (USDT) and Circle (USDC) together account for around 85% of global stablecoin volume.

This trend is likely to intensify further. On the one hand, Executive Order 14178 of January 23 this year has suspended work on state-issued central bank digital currency in the United States, thereby strengthening the private sector as the primary driver of innovation in digital forms of money. On the other hand, the GENIUS Act adopted in the summer establishes, for the first time, a nationwide and uniform regulatory framework for stablecoins in the United States. This increases legal certainty for providers, strengthens user confidence, and is likely to attract additional investment and further accel-erate the pace of innovation.

This development underscores the innovation and growth potential of tokenised forms of money while simultaneously increasing the pressure on Europe to keep pace technologically and politically. In this context, the European Central Bank has suggested in several public statements that the digital euro represents a key response to the growing importance of non-European stablecoins:

„The digital euro is also an effective tool to limit the dominance of foreign digital currencies, including the monetary sovereignty risks created by widely-adopted foreign-currency stablecoins.“ (Philip R. Lane, Member of the Executive Board of the ECB , March 2025)

“[…] the digital euro would limit the likelihood of foreign currency stablecoins becoming widely used for retail payments within the euro area.” (Piero Cipollone, Member of the Executive Board of the ECB, May 2025) 

However, this conclusion is incorrect. The digital euro would only be suitable for effectively countering the growing spread of U.S. dollar stablecoins if it made their use unnecessary. This would require the digital euro to pursue comparable objectives and address the same use cases as U.S. stablecoins. That is not the case, however.

Different objectives: retail CBDC versus stablecoins

The digital euro pursues a fundamentally different objective than stablecoins. In its planned design as a retail CBDC, it is primarily conceived as a digital counterpart to today’s cash and is not intended to generate profits for the Eurosystem. The digital euro is meant to ensure that citizens have access to central bank money in digital form. Stablecoins, by contrast, are not central bank money but privately issued, tokenised money that is deliberately geared toward efficiency gains, technological innovation, and global scalability in payments.

Diverging use cases in payments

These differing objectives are directly reflected in their respective areas of application. The digital euro primarily targets payment use cases that are already served today by established payment infrastructures, in particular international card schemes. These include point-of-sale payments, e-commerce transactions, and peer-to-peer payments within the euro area. Stablecoins, by contrast, open up a far broader range of use cases. They are used in trading digital assets, serve as a central settlement medium in DeFi protocols, i.e. blockchain-based applications for lending, trading, and liquidity provision without central intermediaries, enable low-cost cross-border payments, and function as a store of value in countries with unstable currencies. In addition, they allow for programmable payments, for example for micropayments in the Internet of Things or automated treasury and settlement processes. In this way, stablecoins encroach upon core functions of existing financial architectures—particularly payments, settlement, clearing, and liquidity management—and structurally challenge them.

Technological and geographical constraints of the digital euro

While stablecoins are based on open blockchain infrastructures, the digital euro remains technologically constrained. Its retail version is not intended to be built on a blockchain, which excludes smart contract applications from the outset. At the same time, the use of the digital euro is geographically limited to the euro area; cross-border use beyond this currency area is not envisaged. As a result, the growing global influence of U.S. dollar–based stablecoins is not addressed.

Global reach of U.S. stablecoins and the risk of digital dollarisation

These technological and institutional limitations are particularly significant in a globally interconnected payments environment. The growing use of U.S. dollar–denominated stablecoins in an almost borderless digital setting further strengthens the role of the U.S. dollar as the international anchor currency. The digital euro does nothing to counter this development and therefore misses the opportunity to position the euro as an attractive digital currency beyond Europe.

Time lag of the digital euro relative to market-ready stablecoins

The development of the digital euro takes time. Stablecoins, by contrast, are already market-ready and scalable today. Even if the digital euro were able to cover the use cases of stablecoins in the future, this would realistically be possible only from 2029 onward in a best-case scenario. Stablecoins are already in circulation, are gaining increasing acceptance, and are growing dynamically, thereby creating facts on the ground that are difficult to reverse.

The digital euro therefore does not offer a substantive response to the rapidly growing influence of non-European stablecoins. It differs fundamentally from them both technologically and in its areas of application. Interpreting the digital euro as a realistic answer to U.S. stablecoins nevertheless risks ob-scuring the necessary debate about how Europe can respond effectively to recent developments.

To remain competitive in the global landscape of digital currencies and financial innovation, Europe would first need a shared strategic vision for the future of payments. Stablecoins, tokenised deposits (CBMT), wholesale CBDC, as well as existing and new conventional payment methods should be under-stood as complementary building blocks of an integrated ecosystem. Within this ecosystem, private-sector innovations around the tokenisation of money would need to be actively promoted so that the EU does not fall further behind in this field.

Important guidance on how this can be achieved is provided by the recently published position paper of the banking association, “Stablecoins and other types of tokenised private sector money”.