Europe is facing a challenge to its monetary autonomy from the US due to the Trump administration’s favorable stance towards cryptocurrencies, particularly dollar-backed stablecoins. The European Stability Mechanism (ESM) managing director Pierre Gramegna warned that the US’s changing stance could lead to foreign and American technology firms pursuing large-scale payment solutions using stablecoins, potentially affecting the euro area’s financial stability and monetary sovereignty.
US dollar-pegged stablecoins currently have a combined market cap of over $224 billion and play a significant role in global finance, moving over $4 trillion in the past 30 days. In response to these concerns, the ESM supports the European Central Bank’s (ECB) accelerated efforts to develop and implement a digital euro. The ECB has been urged to speed up the push for the digital euro to respond to Trump’s promotion of dollar-backed stablecoins globally.
The urgency of developing a European central bank digital currency (CBDC) has been emphasized by Gramegna, highlighting the importance of maintaining financial autonomy and stability in the region. The decision on the digital euro will be crucial in Europe’s strategy to navigate the evolving global digital asset landscape amidst Trump’s executive orders promoting cryptocurrencies and stablecoins.
Trump’s administration has taken further steps in the crypto industry by signing a second executive order establishing a Strategic Bitcoin Reserve and a Digital Asset Stockpile. These reserves will hold seized cryptocurrencies and be managed by the Treasury, with the goal of accumulating more Bitcoin in a budget-neutral manner. Trump’s focus on stablecoins is part of a plan to ensure the US dollar remains the global reserve currency.
In contrast to the US’s approach, the ECB has maintained a firm rejection of Bitcoin as a reserve asset. ECB President Christine Lagarde has emphasized the importance of reserves being liquid, secure, and safe, without the risk of being associated with illicit activities such as money laundering. Europe’s response to the US’s changing stance on cryptocurrencies will be crucial in maintaining financial stability and autonomy in the region.
