ECB Signals Pivot On Stablecoins As U.S. Advances Dollar-Based Tokens

Once viewed as illiquid and risky instruments, euro-pegged stablecoins are now being recast by the European Central Bank (ECB) as a strategic tool to protect Europe’s monetary autonomy.

In a July 28 blog post, Jürgen Schaaf, adviser to the ECB’s executive board, warned that “without a strategic response, European monetary sovereignty and financial stability could erode,” as U.S. dollar-backed stablecoins extend their global reach.

Schaaf wrote that euro-based stablecoins “if designed to high standards and effective risk mitigation, could serve legitimate market needs,” adding that they could also “reinforce the international role of the euro.”

The change in messaging comes just weeks after the U.S. passed the GENIUS Act, laying out a federal framework for stablecoins. Schaaf called the Act “more lenient in some areas” than Europe’s MiCA regulation and cited market research projecting that the supply of stablecoins “could grow from USD 230 billion in 2025 to USD 2 trillion by the end of 2028.”

That expansion could challenge the euro’s role in global finance. The ECB warns that “should US dollar stablecoins become widely used in the euro area – whether for payments, savings or settlement – the ECB’s control over monetary conditions could be weakened.” The blog further cautions that dollar-backed stablecoins, already being integrated by Visa, Mastercard, and U.S. tech giants, “may compete directly with euro-based instruments in cross-border transactions.”

U-turn on Stablecoins

In 2022, the central bank stated in a research paper that euro-based coins are “less liquid and tend to be sold similarly to other risky assets rather than behaving like a vehicle in digital transactions and trading.”

The report also concluded that stablecoins “should not be regarded as a new class of safe asset but rather as a less volatile but risky crypto-asset.”

Yet today, the bank appears to be acknowledging a role for private-sector solutions alongside its flagship digital euro initiative, stating that the Eurosystem’s digital euro project and private-sector innovations are “complementary elements in a broader European digital payments strategy.”

Dollar Dominance

In a recent report, BlackRock said the new U.S. law “cements the role of stablecoins” as a payment method. The asset management giant also pointed to the GENIUS Act as a key turning point, emphasizing its focus on stablecoins “as payment tools rather than investments.”

“This regulation could reinforce dollar dominance by enabling a tokenized U.S. dollar-based ecosystem for international payments,” the firm said, as the stablecoin market climbed to $260 billion in 2025 — up from less than $10 billion in 2020 — and now accounts for roughly 7% of the total crypto market.

However, the euro-pegged stablecoin market remains relatively small compared to its U.S. counterpart.

According to data from CoinGecko, euro stablecoins have a combined market capitalization of just $487 million, a fraction of the $267.8 billion held by dollar-backed stablecoins.

As of press time, Circle’s EURC leads the euro cohort with $210 million in market cap, nearly half of the overall sector.