ECB’ Jürgen Schaaf Reveals How to Counter US Dollar-Pegged Stablecoins Dominance

The rise of stablecoins, particularly those pegged to the United States dollar, presents a significant challenge to the established global financial order.

Notably, a digital euro, or a central bank digital currency, often serves as the primary solution. However, a recent study by a European Central Bank (ECB) advisor suggests a more balanced, multi-part plan is needed to protect the Eurozone’s money control.

Jürgen Schaaf, an ECB advisor, also wrote on the ECB website that simply using a digital euro is not enough. He suggests a broader plan that includes stablecoins tied to the euro and regulated by authorities, the use of new technologies like distributed ledger technology (DLT), and enhanced cooperation with other countries.

Strategic Address to US Dollar Stablecoin Dominance

Schaaf’s study highlights that the European Union needs to address the increasing influence of dollar-based stablecoins. He warns that ignoring this issue could prove costly and suggests the EU should actively create and promote the use of appropriately regulated and overseen euro stablecoins.

This stance implies that stablecoins, rather than solely relying on the digital euro, could serve as the EU’s primary instrument to counter the US stablecoin influence, stating:

“Euro-based stablecoins, if designed to high standards and effective risk mitigation, could serve legitimate market needs. They could also reinforce the international role of the euro.”

However, this perspective contrasts with previous assertions that the digital euro should be the central focus. Fabio Panetta, Governor of the Bank of Italy and a former ECB official, previously noted the slow adoption rate of euro-pegged stablecoins, despite regulatory frameworks like MiCA, arguing that the digital euro is crucial in addressing this issue.

ECB Leverages DLT to Enhance Europe’s Payment

Notably, the ECB’s recent approval of two DLT pilot projects, Pontes and Appia, further indicates its commitment to leveraging DLT to enhance Europe’s payment infrastructure.

Moreover, these projects aim to modernize both wholesale and cross-border payment systems, potentially offering a more efficient and cost-effective alternative to traditional methods.

Schaaf also says that besides technology, the world needs more explicit rules for stablecoins. He notes the differences between the US GENIUS Act and the EU’s MiCA rules. He suggests changing how we regulate these coins to make things fairer and lower the possible dangers.

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