EU explores Euro stablecoins and DLT to counter US digital asset dominance

The European Union is exploring alternatives beyond the digital euro to tackle the growing dominance of US dollar-backed stablecoins in global finance.

An adviser to the European Central Bank (ECB) suggested that regulated euro-pegged stablecoins and distributed ledger technology (DLT) should play a bigger role in Europe’s strategy.

The remarks come amid concerns that a central bank digital currency (CBDC) alone will not be sufficient to counterbalance the rising influence of dollar-based digital assets.

Published on the ECB’s official blog on Monday, adviser Jürgen Schaaf’s post lays out multiple strategic levers that the EU could adopt to protect its monetary sovereignty, including increased support for euro-denominated stablecoins, stronger regulatory alignment, and new DLT-powered projects.

Euro-denominated stablecoins pitched as strategic alternative

Schaaf stated that regulated euro-pegged stablecoins, if designed with robust risk controls, could directly serve market needs and support the euro’s global standing.

Rather than waiting on the full rollout of the digital euro, Schaaf emphasised that private-sector stablecoins compliant with EU regulations could provide a faster and more flexible response to the growing influence of US-backed tokens.

This recommendation reflects growing concern within European institutions about falling behind the US, especially since the signing of an executive order by US President Donald Trump in January that aims to reinforce dollar dominance by supporting the development of stablecoins.

Euro-based stablecoins have so far seen slow adoption, despite regulatory frameworks such as the EU’s Markets in Crypto-Assets (MiCA) attempting to provide clarity.

In May, former ECB board member Fabio Panetta noted that euro stablecoins remained largely underused, even though MiCA laid the groundwork for their expansion.

DLT infrastructure advances through ECB pilot schemes

While the digital euro remains part of the ECB’s long-term plan, Schaaf underscored that distributed ledger technology could act as an essential tool for overhauling Europe’s wholesale and cross-border payment systems.

In early July, the ECB approved two DLT pilot projects — Pontes and Appia — designed to enhance Europe’s payments infrastructure and financial market integration.

Schaaf explained that DLT offers tangible improvements for both domestic and international payments and could serve as a critical element in a broader digital financial strategy.

These projects indicate the ECB’s willingness to collaborate with private-sector technology providers to modernise European finance.

Regulatory gaps between EU and US raise coordination issues

The divergence in regulatory approaches between the US and the EU has also come under scrutiny.

Schaaf called attention to the lack of global coordination, pointing out the disparities between the US’s GENIUS Act and Europe’s MiCA regulation.

This regulatory gap could create a disadvantage for European digital asset initiatives unless addressed through better international cooperation.

By embracing high-standard euro stablecoins and deploying DLT initiatives, Schaaf argues that Europe can close the gap and reinforce the euro’s monetary role.

He cautioned that staying neutral or slow to act could result in strategic setbacks for the region.

Decision on digital euro expected in 2025

The ECB’s Governing Council is expected to decide by the end of 2025 whether to proceed with the launch of the digital euro, which entered the “preparation phase” in November 2023.

While officials like board member Piero Cipollone have maintained that the digital euro is essential for safeguarding the eurozone’s monetary sovereignty, Schaaf’s comments suggest a more diversified path forward.

The EU is now clearly considering a combination of tools — including stablecoins, DLT applications, and public digital currency — to maintain control over its financial future.

These strategies aim to ensure that Europe does not fall behind in the rapidly evolving digital finance landscape dominated by US-led initiatives.