European Central Bank advisor Jürgen Schaaf has declared that stablecoins have transitioned from niche cryptocurrency tools to essential components of digital finance infrastructure.
The statement comes as the ECB grapples with the growing influence of US dollar-backed tokens across European markets.
Stablecoins have started to come out of their niche and become more entangled with traditional financial institutions through custody arrangements and derivative exposures, creating potential threats to financial stability.
Dollar Stablecoins Threaten European Monetary Control
US dollar stablecoins account for 99% of total stablecoin market capitalization, while euro-denominated alternatives remain marginal with less than €350 million in market value.
This massive disparity raises concerns about European monetary sovereignty as dollar-pegged tokens gain adoption in EU payment systems.
In an effort to challenge the dominance of stablecoins backed by the US dollar, the ECB is investigating distributed ledger technology and euro stablecoins.
Schaaf contends that strong risk controls and regulated euro-pegged stablecoins might meet market demand while enhancing the euro’s global standing.
The regulatory divergence between the US GENIUS Act and Europe’s MiCA framework creates additional challenges.
If this regulatory vacuum is not closed by improved international cooperation, European digital asset efforts may be at a disadvantage.
Multi-Pronged Strategy Beyond Digital Euro
ECB advisor Jürgen Schaaf stated that a digital euro alone would not be enough to address the challenge posed by US dollar stablecoins.
The central bank official shared a comprehensive approach combining public and private sector initiatives.
Schaaf emphasized how distributed ledger technology may enhance the EU’s cross-border and wholesale payment systems.
The ECB’s Pontes and Appia projects represent key initiatives in modernizing European financial infrastructure through blockchain technology.
The ECB Governing Council will decide whether to move forward with the digital euro launch by the end of 2025. However, officials acknowledge this timeline may extend as technical and regulatory challenges persist.
USD-based stablecoins constitute 90 percent of market capitalization and over 70 percent of trading volume in Europe, according to recent European Banking Authority data.
In July 2025, DWS and Deutsche Bank received regulatory approval for a euro stablecoin, though US dollar stablecoins such as Tether and USDC continued to dominate global transactions.
