The European Central Bank (ECB) is stepping up its warnings regarding the growing adoption of US dollar-pegged stablecoins across Europe, with ECB executive board member Piero Cipollone arguing that a digital euro is crucial to safeguard the eurozone’s monetary sovereignty.
In an article published on April 8, Cipollone highlighted the rising influence of dollar-backed stablecoins and advocated for the creation of a central bank digital currency (CBDC) to limit the use of foreign stablecoins as a medium of exchange within the euro area. According to Cipollone, the introduction of a digital euro would help preserve the euro’s dominance in cross-border payments and prevent further reliance on external providers.
Cipollone highlighted the risks posed by the increasing global adoption of dollar-backed stablecoins and the US’s crypto-friendly policies. He warned that such trends could result in the loss of euro deposits to the US, further entrenching the dollar’s role in international payments. He called for a public-private partnership to retain European monetary sovereignty and noted that the digital euro, as a sovereign European currency, would be essential to this effort.
Additionally, Cipollone addressed the growing preference for digital payments over cash in Europe, which reduced the use of cash, especially in online shopping. While he acknowledged the importance of cash for financial inclusion and resilience, he pointed out that its inability to be used in online transactions necessitates reliance on non-European payment systems.
Cipollone said earlier that the ECB may need to move quickly to introduce a digital euro in response to U.S. President Donald Trump’s promotion of dollar-backed stablecoins.
Trump, who pledged support for stablecoins during his campaign, outlined plans in an executive order to support growth of lawful dollar-based stablecoins. Cipollone argued that this U.S. push could erode European banks’ customer base and strengthen the case for an ECB-backed digital currency.
The ECB is currently testing how a digital euro would operate, though it won’t decide on issuing one until European lawmakers finalize related legislation. A digital euro would function as an ECB-guaranteed online wallet, accessible to non-bank customers for simple payments. Still, holdings would be limited and non-interest-bearing to minimize disruption to traditional banks.
ECB executives also speculate that the launch of a digital currency will reduce the euro zone’s dependence on U.S. electronic payment systems like Visa and Mastercard and to counter the rise of non-European online payment providers such as PayPal.
However, the idea of a digital euro raised concerns among banks, which fear it could draw funds away from their accounts. The ECB’s experimentation continues, but Cipollone stressed that the rise of stablecoins, especially under supportive U.S. policies, makes a strong case for Europe to act.