A central bank digital currency (CBDC) alone will not be enough to challenge the rise of US dollar-pegged stablecoins, according to an adviser to the European Central Bank (ECB).
In a blog post published Monday on the ECB’s website, adviser Jürgen Schaaf outlined a range of strategic options for the European Union to address the rapid rise of dollar-based stablecoins.
Among those options were regulated euro-pegged stablecoins, distributed ledger technology (DLT) applications and the ongoing development of the digital euro.
He also emphasized the role of stronger global coordination on stablecoin regulation, highlighting stablecoin regulation disparities between the US GENIUS Act and the EU’s Markets in Crypto-Assets (MiCA) regulation.
Euro-based stablecoins as the first lever
“First, more support could be provided for properly regulated euro-denominated stablecoins,” Schaaf wrote, suggesting that stablecoins — rather than the digital euro — would be the EU’s primary response to the US stablecoin push.
“While the neutrality of public institutions is often preferred, a strategic blind spot in this space could prove costly,” Schaaf said, adding:
“Euro-based stablecoins, if designed to high standards and effective risk mitigation, could serve legitimate market needs. They could also reinforce the international role of the euro.”
Some studies previously highlighted the slow adoption rate of Europe-based stablecoins.
In May, Bank of Italy Governor Fabio Panetta, a former ECB official, said the circulation of euro-pegged stablecoins remained limited despite frameworks like MiCA attempting to promote their use.
Related: Euro stablecoin by DWS and Deutsche Bank gets regulatory approval
Panetta also argued that the digital euro would be key to addressing the issue of the slow adoption of euro stablecoins.
ECB looks beyond digital euro
Schaaf, however, framed the digital euro as just one part of a larger digital payments strategy. He said the public CBDC, along with private innovation and DLT applications, can act as complementary pillars in safeguarding European monetary sovereignty.
“In point-of-interaction payments, the digital euro promises to be a robust line of defence of European monetary sovereignty,” he said.
Related: Shanghai officials warm to stablecoins despite China crypto ban: Report
While not expanding on the digital euro, Schaaf focused on the use of distributed ledger technology (DLT) as another option, saying that the technology offers improvements for domestic wholesale payments and cross-border payments.
An excerpt from the ECB’s announcement on approving Pontes and Appia projects on July 1. Source: ECB
In early July, the ECB approved two DLT pilot projects — Pontes and Appia — aimed at strengthening Europe’s wholesale and cross-border payment infrastructure.
EU to decide on the digital euro in 2025
The latest remarks by Schaaf bring fresh evidence that Europe is considering a multi-pronged approach to respond to the US stablecoin leadership rather than focusing on just one initiative, such as the digital euro.
Europe became concerned about US leadership in digital financial technology soon after US President Donald Trump signed an executive order pledging to strengthen the US dollar’s sovereignty by promoting stablecoins in January.
ECB President Christine Lagarde pushed the digital euro project at a press conference in July. Source: ECB
ECB officials have repeatedly approached the issue since, with board member Piero Cipollone arguing that the digital euro could help the EU preserve the eurozone’s monetary sovereignty.
After moving the digital euro to the “preparation phase” in November 2023, ECB officials have yet to decide on whether to move forward with its launch. According to the ECB, the ECB Governing Council will decide whether to move on to the next phase of preparations by the end of 2025.
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