The dominance of the U.S. dollar-based stablecoin could be a threat to Europe, Jürgen Schaaf, an adviser for the European Central Bank (ECB), wrote in a Monday (July 28) blog post.
After growing in popularity over the last few years, stablecoins achieved even more prominence after President Donald Trump signed a law creating a regulatory framework around the dollar-pegged coins earlier this month.
“Such dominance of the U.S. dollar would provide the United States with strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence,” Schaaf wrote in the post, which the ECB said does not necessarily reflect its views. “For Europe, this would mean higher financing costs relative to the United States, reduced monetary policy autonomy and geopolitical dependency.”
If dollar-based stablecoins become more popular in the European Union, the central bank’s control over monetary conditions could lessen, Schaaf wrote in the post. Although gradual, this growth could mirror patterns seen in dollarized economies, particularly if users look for advantages not present in “euro-denominated instruments.”
“Such dynamics would be difficult to reverse given the network character of stablecoins and the economies of scale in this context, Schaaf wrote in the post. “The larger their footprint, the harder these would be to unwind.”
Europe needs to quickly move to develop a digital euro and should promote the creation of more euro-based stablecoins, Schaaf wrote in the post.
Meanwhile, stablecoins could change how global enterprises access, store and move money — particularly in “places where trust is scarce and banking is broken.”
“There’s been a big shift in terms of adoption of stablecoin payments that is being driven by uncertainty in geopolitics,” Currency.com CEO Konstantin Anissimov said in a May interview with PYMNTS. “I am personally seeing a big increase of small to medium enterprises utilizing stablecoin payments because banking rails are harder and harder to use.”
A medium-sized exporter in the Philippines, for example, buys electronics components from Taiwan and sells to distributors in Kenya, a deal involving three currencies, two central banks and at least four intermediaries.
By using stablecoin payments, companies can denominate invoices in stablecoins, settle within hours and avoid the friction of legacy payment rails, instead of routing through correspondent banks or relying on volatile foreign exchange pairs.