Widespread use of the US dollar-denomined stableecoins in the European Union (EU) to payments or settlement could harm the monetary of the European Central Bank, an ECB adviser said.
If US-stacked stablecoins, digital assets supported by the dollar, get traction for use in the EU, the effect could be the effect of the US dollar on development economies, Jürgen Schaaf said in a blog post on Monday. In particular, they have made it more difficult for decision makers to set interest and control the money supply.
“This intervention, although gradually, could repeat patterns observed in dollarized economies, especially if users seek perceived security or benefit benefits that are not available in euro-denomined instruments,” Schaaf said.
The largest stableecoins are Tether’s USDT and Circle’s USDC, which together make up more than 80% of the total stableco -market capital climbing up to $ 271.8 billion following the signing of a US stableecoin law on July 19.
Schaaf described the US law similar to EU markets in Crypto Assets (MICA) regulation, but more mild in some areas. The implementation of the law could result in the stableecoin market growing to $ 2 trillion by the end of 2028, Investment Bank Standard Chartered said in April.
“The US Dollar StableCecoins can cement their early dominance unless credible euro alternatives are realized,” Schaaf wrote. Such a dominance “would give the United States strategic and economic benefits, allowing it to finance its debt more cheaply while exercising global influence.”
In cross-border transactions, dollar-denomined stableecoin could compete directly with euro-based instruments, Schaaf said. They could also be strongly invoked for tokenized settlements as this process requires a digital representation of cash to run transactions, he added.
To mitigate against the threat, Schaaf suggested that more support be offered to euro-stacked stablecoins. He also suggested that the digital euro – a digital currency that would be issued by the ECB – would have a role to play.
“The digital euro promises to be a robust line of defense for European monetary sovereignty,” Schaaf said.
The ECB is not the only regulator that is concerned about the dominance of stableecoins bound to greenback. China is also considering the need for a regulated offshore yuan (CNH) stableecoin, Animoca Group President Evan Ayuang said in an interview with Coindesk last week.
