The growing dominance of U.S. dollar-backed stablecoins poses risks to Europe’s financial independence, according to a blog post by European Central Bank (ECB) adviser Jürgen Schaaf published on Monday.
Schaaf argued that the widespread use of dollar-denominated stablecoins in the euro area could weaken the ECB’s control over monetary policy, increase borrowing costs for European countries, and deepen geopolitical dependence on the United States. He noted that such dominance gives the U.S. strategic and economic advantages by enabling cheaper debt financing and greater global influence.
Stablecoins, which are cryptocurrencies pegged to traditional assets like the dollar, have seen rapid growth. Their expansion received further momentum after U.S. President Donald Trump recently signed legislation establishing a regulatory regime aimed at reinforcing the dollar’s role as the global reserve currency.
Currently, dollar-backed stablecoins issued by companies such as Tether and Circle dominate the market, while euro-denominated stablecoins remain marginal, with a combined market capitalization below 350 million euros, the blog stated.
To counter these risks, Schaaf suggested that Europe accelerate the rollout of a digital euro, a project that has been delayed by legislative hurdles. He also recommended fostering the development of euro-backed stablecoins and expanding the use of distributed ledger technology to enable faster and cheaper cross-border payments.
The blog concluded that stronger global coordination on stablecoin regulation is essential to avoid instability, regulatory arbitrage, and a further concentration of power in the U.S. dollar.