The European Central Bank recently expressed concerns over President Donald Trump’s pro-crypto agenda, warning that an influx of dollar-backed stablecoins could pose a threat to financial stability in the eurozone. The ECB’s confidential policy paper raised alarm over the potential impact of aggressive US crypto reforms, such as the STABLE and GENIUS acts, which could significantly increase the supply of dollar-backed stablecoins by 2028. This increased supply could undermine the EU’s new crypto regulatory framework, known as the Markets in Crypto Assets Regulation (MiCA), and lead to a shift in savings from euros to dollars.
MiCA, which came into effect earlier this year, was designed to be the world’s first comprehensive crypto regulation. However, the ECB now argues that it may not be robust enough to protect the EU from the spillover effects of a rapidly expanding US stablecoin sector. ECB President Christine Lagarde and digital payments chief Piero Cipollone have expressed concerns that the rise of US-backed stablecoins could jeopardize EU monetary sovereignty and expose European banks to redemption risks. The central bank’s paper specifically criticized MiCA’s allowances for “multi-issuance” structures, which could enable non-EU issuers to dominate EU markets and increase European exposure to US Treasury debt.
The European Commission, on the other hand, has defended MiCA against the ECB’s criticisms, asserting that the regulation already includes provisions to mitigate risks posed by foreign-backed stablecoins. Commission officials argued that crypto firms must meet strict requirements to operate within the EU and emphasized that the risks associated with global stablecoins are manageable under the existing legal framework. The Commission pointed to successful enforcement actions, such as the delisting of Tether (USDT) from some exchanges, as evidence of the regulation’s effectiveness. Despite the disagreement between the ECB and the European Commission, both institutions agree on the importance of rigorous enforcement and acknowledge the geopolitical implications of the US administration’s efforts to internationalize the dollar through crypto innovation.
The tension between the ECB and the European Commission highlights broader strategic concerns within the EU over its financial independence. As Trump’s crypto-friendly policies gain traction and digital dollars continue to find use in unstable economies abroad, the EU is grappling with the implications of a potential shift in savings from euros to dollars. Both institutions recognize the need for stringent enforcement measures to safeguard the EU’s financial stability and prevent the dominance of non-EU issuers in the European stablecoin market. The ongoing debate underscores the challenges faced by the EU in navigating the evolving landscape of global finance and maintaining its sovereignty in the face of increasing competition from the US.
