US dollar-pegged stablecoins now account for a staggering 97% of the global stablecoin market. This overwhelming dominance has prompted serious concerns within the European Union, particularly in light of former US President Donald Trump’s recent executive order aimed at strengthening the United States leadership in digital financial technology.
The executive order, which seeks to bolster US dollar-backed stablecoins while banning central bank digital currencies (CBDCs) domestically, is raising eyebrows in Europe. European leaders fear that these moves could further entrench US dollar supremacy, undermining Europe’s financial and strategic autonomy.
Europe Sounds the Alarm Over USD Stablecoin Dominance
Piero Cipollone, an executive board member of the European Central Bank (ECB), addressed the pressing issue of USD stablecoin dominance at the 13th ILF Conference on the Future of the Financial Sector in Frankfurt on January 24. Cipollone highlighted the urgent need for the EU to accelerate the development of its own CBDC, the digital euro, as a countermeasure.
The dominance of the US dollar in the stablecoin market poses a significant challenge to Europe’s financial independence, Cipollone stated. We must prioritize the digital euro to preserve access to central bank money and maintain European banks’ critical role in our financial system.
Currently, US dollar-backed stablecoins comprise 97% of the $215 billion global stablecoin market, according to CoinGecko. Cipollone also expressed concerns about Europe’s reliance on international card schemes, which settle over 60% of card payments in the EU.
The push for the digital euro is not solely about countering USD stablecoin dominance. Cipollone emphasized that Europe’s growing dependence on non-EU payment platforms, including mobile apps that now account for 9% of retail transactions (up from 1% in 2019), underscores the urgency of building a robust European digital currency ecosystem.
Without a digital euro, we risk ceding control of our financial infrastructure to external forces, Cipollone warned.
The digital euro is envisioned as a tool to strengthen Europe’s financial sovereignty, offering an alternative to dollar-backed stablecoins and ensuring continued access to central bank money for EU citizens and businesses.
Trump’s executive order, titled “Strengthening American Leadership in Digital Financial Technology, underscores the administration’s commitment to maintaining the United States’ dominance in the global financial system. By promoting dollar-backed stablecoins, the order aims to solidify the dollar’s position as the world’s reserve currency.
However, the order explicitly bans the issuance and circulation of CBDCs within the United States, creating a stark contrast to the EU’s approach.
David Lesperance, a legal expert and crypto attorney, views the executive order as a strategic move to safeguard the dollar’s supremacy.
The Trump administration supports digital assets only insofar as they bolster the USD, Lesperance explained. Any development threatening the dollar’s status as the world’s reserve currency, particularly CBDCs, is met with resistance.
Lesperance also suggested that the US may use economic leverage, such as tariffs, to pressure other nations into aligning with its stance on CBDCs.
The ramifications of USD stablecoin dominance extend far beyond Europe. For emerging markets, the prevalence of dollar-backed stablecoins can exacerbate financial dependency on the US dollar, limiting these countries’ ability to stabilize their own currencies.
Critics argue that Trump’s executive order prioritizes US interests at the expense of global financial equity. By promoting stablecoins while opposing CBDCs, the US risks creating a lopsided digital financial landscape that disproportionately benefits American enterprises.
However, proponents see the order as a necessary step to ensure the US remains at the forefront of financial innovation. This is about positioning the US as a global leader in digital finance, said economic analyst Jane Wilson. Stablecoins offer a pathway to modernize financial systems while upholding the dollar’s dominance.
Is Dollar Dominance Trump’s Ultimate Goal?
The debate over the true intent behind Trump’s executive order continues to intensify. While some view it as a genuine effort to advance digital financial technology, others see it as a calculated move to entrench USD stablecoin dominance and reinforce US economic power.
Lesperance believes the latter interpretation holds more weight. “The executive order’s broad language masks a clear agenda: ensuring that the US dollar remains unrivaled in both traditional and digital financial systems, he said.
As the EU races to develop the digital euro, the battle over USD stablecoin dominance will likely shape the future of global finance. The European Central Bank faces the daunting task of creating a CBDC that can compete with the entrenched position of dollar-backed stablecoins, while navigating the geopolitical challenges posed by the US.a
Cipollone remains optimistic about Europe’s ability to rise to the challenge. By investing in the digital euro, we can secure Europe’s financial independence and chart a path toward a more balanced global financial system, he said.
Trump’s executive order, meanwhile, sets the stage for a bold reimagining of the United States’ role in digital finance. Whether this approach will lead to greater innovation or deepen global divisions remains to be seen.
The dominance of US dollar-backed stablecoins is reshaping the global financial landscape, with Trump’s executive order serving as a catalyst for intensified debates. As Europe doubles down on its CBDC efforts, the coming years will determine whether USD stablecoin dominance continues to grow unchecked or if alternative systems like the digital euro can offer a viable counterbalance. Get more from The Bit Gazette
