A strategic shift is underway in Europe as senior financial leaders push to break the dominance of U.S. dollar stablecoins. With the new Markets in Crypto-Assets Regulation (MiCA) as its rulebook, the EU is laying the groundwork for a future where the euro is a dominant force in the digital payments landscape.
The Impetus for a European Digital Currency
The drive for euro-denominated stablecoins is rooted in a concern for strategic autonomy. Pierre Gramegna, Managing Director of the European Stability Mechanism (ESM), has publicly warned that “Europe should not be dependent on US dollar-denominated stablecoins, which are currently dominating markets”. This sentiment is echoed by the European Central Bank (ECB), which has highlighted the risks that widespread use of foreign stablecoins could pose to the euro area’s financial stability and monetary sovereignty.
The scale of the challenge is clear. The global stablecoin market is overwhelmingly denominated in U.S. dollars, which account for about 99% of the total market capitalization. In contrast, euro-linked stablecoins represent a minuscule share, with a market value of less than €350 million (approximately $370 million). This vast disparity has accelerated the EU’s efforts to foster a credible, home-grown alternative.
MiCA: The Rulebook for a New Market
The cornerstone of the EU’s strategy is the Markets in Crypto-Assets Regulation (MiCA), which provides a comprehensive regulatory framework for crypto-assets. For stablecoins, MiCA establishes strict requirements to ensure safety and reliability. Issuers of stablecoins, categorized as asset-referenced tokens (ARTs) or e-money tokens (EMTs), must be authorized as a credit institution or an electronic money institution. A key mandate is the full reserve backing rule, requiring issuers to hold liquid reserves on a 1:1 basis for all tokens in circulation. This framework is designed to build user trust and ensure that these new digital currencies are robust and secure.
The Road Ahead: Collaboration and Competition
Concrete steps are already being taken to bring this vision to life. A consortium of nine major European banks, including ING and UniCredit, has announced a joint initiative to launch a MiCA-compliant, euro-backed stablecoin in the second half of 2026. This initiative aims to provide a “real European alternative” for near-instant, low-cost payments and settlements.
This push for private stablecoins exists alongside the planned digital euro, a central bank digital currency (CBDC). However, with the digital euro not expected until at least 2029, privately issued, regulated stablecoins are poised to be the first movers in establishing the euro’s presence in the digital currency space.
In essence, Europe is leveraging its regulatory prowess to challenge the existing digital currency order. By promoting secure and regulated euro stablecoins, the EU aims not just to catch up, but to create a more balanced and multipolar global system for digital money.
