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Europe must rapidly issue euro-backed stablecoins to challenge U.S. dollar dominance in digital payments, the European Stability Mechanism’s managing director said Thursday, warning that the region risks losing monetary sovereignty to American-controlled tokens.
Pierre Gramegna, Managing Director of the European Stability Mechanism (ESM), said Europe must act swiftly to issue domestic stablecoins and strengthen its digital monetary sovereignty.
“Europe should not be dependent on U.S. dollar-denominated stablecoins, which are currently dominating markets,” Gramegna said during a Thursday hearing on the eurozone’s economic outlook. “Stablecoins are an inevitable part of this equation. In a rapidly evolving financial landscape, Europe should do its best to facilitate the generation of euro-denominated stablecoins by domestic issuers.”
His comments come as policymakers across the bloc increasingly warn that reliance on U.S.-issued tokens could undermine Europe’s control over payments, capital flows, and the broader digital economy.
Gramegna’s remarks align with mounting concerns that the U.S. is establishing a commanding lead in digital currency adoption following the introduction of the GENIUS regulatory framework earlier this year. The law accelerated the growth of dollar-backed stablecoins, led by Tether (USDT) and Circle’s USD Coin (USDC) together accounting for over 99% of the global stablecoin market.
European officials fear this could erode the euro’s global competitiveness. Paschal Donohoe, President of the Eurogroup, said that Europe’s digital financial transformation must balance innovation with sovereignty.
“The digital euro could still be a net positive for commerce in the region,” he said.
The European Central Bank (ECB) is already making progress. According to Executive Board member Piero Cipollone, the central bank could roll out a digital euro by 2029, calling recent talks among member states a “major breakthrough.” He added that consensus on deposit protection limits was a critical step toward ensuring financial stability.
By early 2026, the European Parliament is expected to finalize a legislative framework for the project, marking a significant milestone in Europe’s digital currency ambitions.
While the digital euro is being designed as a central bank-issued currency, policymakers emphasize that private-sector innovation will be vital. The EU’s Markets in Crypto-Assets (MiCA) regulation, which came into effect in mid-2024, provides legal clarity for issuing euro-backed stablecoins under strict transparency and reserve requirements.
Jürgen Schaaf, adviser to the ECB, wrote on the central bank’s website that Europe must encourage “properly regulated euro-denominated stablecoins” to enhance monetary sovereignty. “Without credible alternatives, the EU risks deepening its dependence on the dollar system,” he said.
Schaaf also noted that the U.S. GENIUS Act and MiCA are broadly aligned, though the American framework offers more flexibility which is a factor he warned could reinforce the dominance of dollar-pegged tokens if Europe delays implementation.
His view is echoed by Bank of Italy Governor Fabio Panetta, who cautioned that the EU’s slow regulatory rollout has hindered the adoption of euro-backed stablecoins, despite widespread institutional interest.
“We cannot afford complacency,” Panetta said at a financial summit in Rome. “Stablecoins and central bank digital currencies must advance together if Europe intends to remain competitive.”
In a major development, nine of Europe’s largest banks including ING, UniCredit, CaixaBank, and Danske Bank announced plans to launch a euro-backed stablecoin consortium by 2026. The token, to be issued under MiCA regulations, aims to facilitate real-time, 24/7 cross-border transactions.
The European Central Bank has also greenlit two distributed ledger technology (DLT) pilot projects, Pontes and Appia, designed to test blockchain-based settlement systems for wholesale payments.
Analysts at Bloomberg report that euro-pegged tokens currently represent less than €350 million in total circulation as a fraction of the global stablecoin market dominated by the dollar.
Launching reliable euro-backed stablecoins is not just an economic move; it’s a strategic necessity, said Dr. Clara Meijer, Senior Policy Fellow at the Bruegel Institute. The future of the euro’s relevance in digital finance depends on Europe’s ability to innovate at scale.
As global finance transitions into the blockchain era, Europe faces a defining choice: embrace innovation or risk marginalization. Both the digital euro and privately issued euro-backed stablecoins are now central to the continent’s long-term monetary autonomy strategy.
Pierre Gramegna summed up the sentiment: “Europe must move from observation to action. Stablecoins are here to stay, and it’s time the euro took its rightful place in the digital economy.”
With legislative momentum building and the private sector stepping up, the EU’s next moves will determine whether the euro can reclaim influence in an increasingly tokenized global market.
