ECB reiterates need for a digital euro to counter influence of dollar-based stablecoins

European Central Bank (ECB) Chief Economist Philip Lane has reiterated the need for a digital euro, emphasizing its role in mitigating risks from stablecoins and reducing reliance on US payment firms, Bloomberg News reported on March 20.

Lane said at a conference in Cork, Ireland, that the digital euro central bank digital currency (CBDC) is essential to ensuring Europe’s monetary and financial autonomy amid increasing geopolitical fragmentation.

He added:

“[Digital euro would] limit the likelihood of foreign-currency stablecoins gaining a foothold as a medium of exchange in the euro area.”

Countering stablecoin rise

Lane highlighted the rapid rise of European interest in stablecoins, a market predominantly tied to the US dollar. He also pointed to Europe’s current dependence on US-based payment providers, including Visa, Mastercard, PayPal, Apple, and Google, as a vulnerability in the region’s financial infrastructure.

In this context, Lane argued that a digital euro could address Europe’s fragmentation in retail payments and serve as a unifying force for collaboration among banks and payment service providers.

He added:

“The case for a central bank digital currency is especially strong for a monetary union, especially in the context of a fragmented and externally dependent payments system.”

Push for a digital euro

The ECB has been developing the digital euro project since 2021 and is expected to conclude a preparatory phase by October.

Earlier on March 20, ECB President Christine Lagarde told lawmakers in Brussels that Europe must accelerate progress on retail and wholesale versions of the digital euro to strengthen financial sovereignty and reduce external vulnerabilities.

Notably, Lane’s remarks mark the third time this year that ECB officials have urged the adoption of a digital euro. On March 17, ECB Governing Council member François Villeroy de Galhau warned that President Donald Trump’s aggressive push for crypto adoption could introduce financial instability.

He urged European policymakers to strengthen regulatory measures to mitigate potential risks. Villeroy de Galhau also expressed concerns that the US could create systemic risks beyond its borders by promoting crypto and non-bank finance without robust oversight.

ECB board member Piero Cipollone also called for an accelerated digital euro launch in response to Trump’s executive order promoting dollar-backed stablecoins on Jan. 24.

Speaking at a conference in Frankfurt, Cipollone said stablecoins pose a growing threat to traditional banking systems and financial intermediaries. They could erode bank revenues and client relationships.

He emphasized that a digital euro is necessary to counterbalance these developments and maintain control over the monetary system.