Stablecoin: The EU in Search of Relevance

Stablecoins—cryptographic tokens whose value is pegged to a real-world asset, usually the US dollar—have become the quiet engine behind global digital payments. They are designed to trade at a fixed price (typically 1:1 to the dollar), backed by reserves such as cash or short-term government bonds. For private users, stablecoins offer quick, low-cost transfers and easy access to crypto markets. For businesses, they represent a faster, programmable alternative to traditional cross-border payments.

But their rise has also created a new geopolitical and monetary competition: the United States is using stablecoins to extend dollar dominance, while Europe is scrambling to avoid falling behind.

What Stablecoins Really Are

A stablecoin is a digital token issued by a private company, redeemable at a fixed value—most often one US dollar. This stability is maintained by holding high-quality, liquid collateral. In the United States, that collateral is overwhelmingly US Treasury bills.

Each time a user buys $1 in stablecoins, the issuer invests that $1 in short-term US government debt. The user receives a digital token; the US government receives funding. ING’s chief economist Peter Vanden Houte calls it “a form of money creation”: Treasuries sit on the asset side, tokenized dollars on the liability side.

This mechanism has three major consequences:

1. Stablecoins finance US debt.
   Every token issued creates demand for US government paper.
2. They strengthen the global dollar system.
   Since 99% of all stablecoins today are dollar-denominated, global digital payments increasingly flow through dollar rails.
3. They accelerate digital dollar adoption—without the Fed issuing a CBDC.
   Private companies do the work. The dollar reaps the benefits.

Why Stablecoins Matter for International Trade

For businesses trading across borders, stablecoins can replace slow and expensive correspondent banking chains:

• Payments settle in seconds, not days.
• Fees are a fraction of SWIFT transfers.
• Blockchain settlement offers instant, verifiable proof of payment.
• Smart contracts allow conditional or automated payments:
  a shipment can be paid the moment it is scanned in a port,
  import VAT can be collected automatically,
  or escrow conditions can be executed without intermediaries.

For the financial sector, stablecoins streamline settlement of digital assets—from tokenized securities to crypto portfolios. They reduce counterparty risk and cut costs for clearing and reconciliation.

It is no surprise the market is already worth $300 billion and expected to quintuple in five years.

The Regulatory Divide: United States vs. Europe

Here lies the geopolitical tension.

The US “Genius Act”: Innovation as Industrial Policy

The Genius Act, passed in the summer under President Donald Trump, sets an accommodating regulatory framework for stablecoin issuers. It aims to:

• cement US dominance in digital payments,
• expand global reliance on the dollar, and
• channel massive demand into US Treasury markets.

In other words: stablecoins become an instrument of monetary power.

The act focuses on fostering innovation first, oversight second. The philosophy is simple: grow fast, regulate lightly, export the dollar digitally.

Europe: MiCAR—Regulate First, Compete Later

In contrast, the EU’s Markets in Crypto-Assets Regulation (MiCAR) prioritizes financial stability and strict consumer protection.

MiCAR requires that euro-denominated stablecoins be:

• fully backed by cash or EU sovereign debt,
• supervised under a clear licensing regime,
• transparent in disclosure and auditing,
• and limited in scale to protect the ECB’s monetary autonomy.

These rules are safer—but slower. Critics argue they risk making European projects less competitive than US counterparts. The European Central Bank fears the opposite risk: that a US-dominated stablecoin market could erode control over European monetary policy.

The European Counteroffensive: A Homegrown Stablecoin

Europe is finally moving.

A consortium of nine major European banks—including KBC, ING, and Caixa—plans to launch a European stablecoin in the second half of next year. Their goals are explicit:

• cheaper, almost-instant international payments,
• independence from US intermediaries,
• and a reliable alternative to American stablecoins whose issuers have not always been transparent.

Tether, the market leader, previously misrepresented its reserves, even investing client funds in volatile assets like Bitcoin. The collapse of terraUSD in 2022 wiped out $50 billion in value—an event that still shapes European caution.

Under MiCAR, the new European stablecoin must be backed entirely by euros or EU government bonds, making it more conservative but also more predictable.

The banks say their infrastructure will be open to other European institutions—a crucial step if Europe wants a scale comparable to the US market.

Parallel European Efforts

Europe is also pursuing two additional strategies:

1. The Digital Euro
   A Central Bank Digital Currency (CBDC) designed for retail use—payments between consumers and businesses.
2. G7 Currency-Backed Stablecoins
   A separate alliance including Banco Santander, BNP Paribas, Goldman Sachs, Citi, Deutsche Bank, and UBS is working on stablecoins based on G7 currencies.
   This model mirrors the multi-currency ambitions once envisioned by Facebook’s Libra.

Together, these initiatives reflect an urgent recognition in Brussels, Frankfurt, and major European capitals: the future of money will be programmable, instantaneous, and international. And the EU must not remain a spectator.

A Question of Relevance

The rise of stablecoins has exposed a fundamental difference in mindset:

• The United States treats financial innovation as a strategic asset.
  The Genius Act uses stablecoins to boost Treasury demand and cement the dollar’s global reach.
• The European Union treats financial innovation as a regulatory risk.
  MiCAR aims to protect stability, but may slow European competitiveness.

In a digital economy where speed and scale determine geopolitical influence, these two approaches produce profoundly different outcomes.

The EU now faces a strategic dilemma:
Can it remain a rule-maker without becoming increasingly dependent on US digital financial infrastructure?

The upcoming European bank-backed stablecoin is a first attempt to reclaim relevance.
Its success—or failure—will signal whether the EU can evolve from a regulatory superpower into a genuine actor in the future architecture of global money.