European officials warn that the increasing presence of US-backed stablecoins could pose a serious risk to the euro’s stability and Europe’s financial sovereignty. The European Central Bank (ECB) is pushing forward with the digital euro project to prevent these risks, as concerns grow over US financial institutions integrating stablecoins into traditional banking services. The European Stability Mechanism (ESM) has expressed alarm over recent US decisions allowing national banks to offer stablecoin services without prior regulatory approval. According to Pierre Gramegna, Managing Director of the ESM, the EU must act swiftly to protect its financial independence. “If major US tech firms launch large-scale payment solutions using dollar-backed stablecoins, it could undermine the eurozone’s monetary sovereignty and financial stability,” Gramegna stated at a Eurogroup meeting. The ECB has long cautioned that reliance on US-backed stablecoins could weaken the euro, making Europe more dependent on the US dollar. Gramegna’s comments align with earlier warnings from ECB official Piero Cipollone. In February, Cipollone highlighted that the Trump administration’s support for stablecoins is accelerating the push for digital euro legislation, reinforcing the need for an alternative. “The US sees stablecoins as a way to strengthen the dollar’s global influence, but the ECB is concerned they could disrupt Europe’s financial system,” Cipollone said. The ESM backs the ECB’s digital euro initiative, along with the European Commission’s efforts to update the MiCA (Markets in Crypto-Assets) directive. These regulatory measures aim to prevent European businesses and consumers from becoming too reliant on US-backed stablecoins. Meanwhile, the US government is increasingly embracing crypto, especially stablecoins tied to the US dollar . Federal Reserve Governor Christopher Waller recently stated that stablecoins could reinforce the dollar’s role in global finance. Federal Reserve Chair Jerome Powell has also supported stablecoin regulations to ensure their integration into the financial system. New regulations now permit US banks to offer stablecoin services, which could accelerate their global dominance. Reports suggest that even Bank of America (BoA) is exploring launching its own stablecoin, while Circle CEO Jeremy Allaire is advocating for mandatory US registration of stablecoin issuers. This growing reliance on US-backed stablecoins raises geopolitical concerns. The dominance of the dollar in digital payments could increase as American financial institutions further integrate stablecoins into their services, potentially reducing the euro’s global role. European policymakers are calling for strict regulations and a faster rollout of the digital euro to counteract these risks. The debate over stablecoins reflects broader financial power struggles, with Europe seeking to maintain monetary control while the US strengthens its influence through crypto-driven financial systems.
