Last week we published an analysis of a report from Brussels think tank Bruegel encouraging Europe to support euro stablecoins to avoid dollar stablecoins gaining traction in trading environments. The paper was in preparation for an informal meeting of European central bankers and finance ministers in Nicosia and was presented during the event by authors Lucrezia Reichlin, Bo Sangers and Jeromin Zettelmeyer. Reuters reported that the European Central Bank (ECB) and other central bankers pushed back on the Bruegel proposals, citing sources.
The Reuters article reported that the ECB was concerned euro stablecoins would make bank deposits more fickle, central bankers resisted the idea of the ECB acting as lender of last resort to stablecoin issuers, and policymakers believe the monetary sovereignty threat is overstated. Each raises questions that go beyond the immediate debate.
What’s notable is that Bruegel floated a range of potential policy steps. But the core message was that doing nothing is risky, as it leaves a gap for on chain settlement that may be filled by dollar stablecoins. Monetary instruments rely on network effects. The more an instrument is accepted, the more it is used. Euro stablecoins are currently too small, and with continued regulatory headwinds may not grow quickly enough, meaning dollar stablecoins could dominate. Bruegel’s concerns particularly relate to trading. While MiCA has monetary sovereignty protections for everyday usage, these do not apply to crypto or securities trading.
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