Stablecoins are blockchain-based IOU tokens that are redeemable 1:1 for currency held in reserve. They aim to provide an alternative to the high volatility of popular cryptocurrencies, making them potentially suitable in various blockchain-based financial services and even to pay for goods and services. 

Washington is moving fast to promote the new technology while Europe is stuck in the slow lane, consumed by a policy tug-of-war.  

The US GENIUS Act sets national rules and signals official support for dollar stablecoins as a pillar of US financial power. While Europe’s Markets in Crypto-Assets Regulation (MiCA) reads pro-innovation, it contains sovereignty-first circuit breakers.  

A rift has opened not just across the Atlantic Ocean, but between European policymakers. The European Commission wants to promote stablecoins and make EU and non-EU tokens interchangeable. The European Central Bank (ECB) remains cautious, concerned that “cross-border fungibility” could strain the continent’s financial system. Europe’s financial system watchdog, the European Systemic Risk Board, sounds similar alarms, fretting about the threat of stablecoins slipping past the tight oversight that traditional banks face.  

Yet both the EU and the US agree on the basics: only approved companies can issue stablecoins, each coin must be redeemable 1-for-1 for the money it represents, and issuers must hold safe, liquid reserves without paying interest to holders.  

Beyond these common foundations, though, Europe imposes additional safeguards. Much of the continent’s concern stems from its current dependence on American payments technology; Visa, Mastercard, and the new crypto firms are US-based.  If non-EU stablecoins proliferate, this dependence would deepen and weaken the international role of the euro.  

The European answer is sovereignty: strict guardrails on non-euro stablecoins and a public digital euro to keep payments moving on European rails.  Brussels insists that issuers be based in the EU or seek local authorization, keep the money backing EU customers’ coins in EU banks (even more if the same coin is issued inside and outside Europe), and allow EU regulators to step in to limit or even stop activity.  

While pushing for tighter rules on stablecoins, the ECB is racing ahead with plans for a digital euro. It argues that global dollar-tokens could pull users and payments onto US platforms, and is demanding swift legislative backing for an ECB-guaranteed digital euro wallet. Yet the messaging isn’t uniform: an ECB adviser believes euro stablecoins are the better near-term bet than the digital euro alone. 

Europe’s regulatory fears are causing confusion. France and Finland have already greenlit multi-issuer dollar stablecoin schemes, and France’s markets watchdog is pressing Brussels for clarity.  

In contrast, the US races ahead. The pro-crypto Trump administration has frozen all US Central Bank Digital Currency work and champions instead dollar-backed stablecoins. 

As it debates, Europe risks losing out. Globally, the stablecoin market totals about $300 billion, yet Europe contributes only around $620 million, under 0.21%, while US linked issuance dominates the remaining share. Projections put the market near $400 billion by year-end and $2 trillion by 2028. 

China could emerge as a winner, playing the long game. Alipay (Ant Group) is prepping a euro stablecoin in Luxembourg so it can use EU rules to operate across the continent. 

Euro-area finance ministers are gearing up to accelerate European adoption, deliberating how to scale euro-denominated stablecoins rather than ceding the upstart market to US dollar-based issuers. Nine European banks have teamed up to launch a euro-denominated stablecoin, directly taking aim at dollar-token dominance. The French Central Bank welcomed the move and encouraged more banks to create euro stablecoins to break reliance on dollar-tokens. Wall Street sees where this is going, with US banking giant Citigroup now in the euro-token conversation. 

The Atlantic divide is wide. Stablecoins sold in the US must be supervised onshore, unless the US Treasury certifies the issuer’s home regime as “equivalent.” No such determination has been made yet. In Europe, there’s no equivalence lane: securing an EU licence or authorization is the only way.  

Legal uncertainty could stall dollar-token rollouts in Europe and chill euro-stablecoin plans just as the US market accelerates. Europe’s next moves won’t just shape policy. They will determine whether the euro earns a place in the digital currency order or continues as a bystander to US dominance. 

Padraig Nolan is a Non-resident Fellow with the Tech Policy Program at the Center for European Policy Analysis. He serves as Chief Operating Officer of ETPPA, a prominent EU fintech association. He is also an advisory board member of the Lisbon-based Europe Startup Nations Alliance. Padraig holds a bachelor’s degree in law and economics (University of Galway) and a master’s degree in European law (Utrecht University).

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.

The post Euro-Dollar Crossroads: The Rise of Stablecoins  appeared first on CEPA.