EU Urged to Develop Euro-Denominated Stablecoins Amid Dollar Dominance

According to Cointelegraph, the European Union is being encouraged to advance the development of euro-denominated stablecoins to counter the dominance of US dollar-denominated tokens. Pierre Gramegna, managing director of the European Stability Mechanism, emphasized the importance of this initiative during a recent hearing on the eurozone's economic health, which also addressed digital assets. Gramegna highlighted the need for Europe to reduce its reliance on US dollar-denominated stablecoins, which currently lead the market. He advocated for embracing financial innovation through stablecoins and tokenized assets, urging Europe to facilitate the creation of euro-denominated stablecoins by domestic issuers. Paschal Donohoe, president of the Eurogroup, echoed the call for financial innovation, noting that a digital euro, as a central bank digital currency (CBDC), could positively impact commerce in the region. EU officials acknowledged the necessity of euro stablecoins, especially following the success of dollar-denominated tokens after the implementation of the GENIUS regulatory framework in the United States. This marks a significant shift from previous concerns about the systemic risks associated with stablecoins. The launch of a digital euro CBDC is not expected before 2029, as stated by European Central Bank board member Piero Cipollone. He attributed the delay to EU lawmakers. Cipollone is a strong advocate for the digital euro and opposes privately-issued digital currencies. In September, ECB President Christine Lagarde warned of the risks posed by foreign stablecoins and stressed the need for regulatory measures to prevent these issuers from draining liquidity from the euro and the EU. Stablecoins have gained geostrategic importance as governments aim to digitize their fiat currencies to boost demand. Christopher Waller, a US Federal Reserve governor, has consistently promoted dollar-denominated stablecoins as a means to maintain the dollar's status as a reserve currency. In a 2024 speech, Waller noted that crypto-assets are predominantly traded in US dollars, suggesting that any expansion in decentralized finance (DeFi) trading would likely reinforce the dollar's dominant role.