In a recent regulatory forum, European Central Bank (ECB) President Christine Lagarde cautioned that the lack of global alignment in stablecoin oversight could channel systemic risks into the euro area. She urged EU legislators to require foreign issuers of stablecoins to adopt an “equivalence regime,” ensuring that any stablecoin circulating in the EU adheres to the bloc’s high standards and avoids reserve run vulnerabilities.
Her remarks convey three key messages:
- The EU must not become the world’s redemption backstop for stablecoins, especially for dollar-linked tokens.
- Strong regulatory defenses are needed, with the EU exporting its standards to safeguard financial stability and monetary sovereignty.
- Only euros issued by the ECB constitute legal tender in the euro area.
Regulatory Concerns and Defensive Architecture
The EU has already enacted the Markets in Crypto-Assets Regulation (MiCA), mandating that fiat-pegged stablecoins be backed by reserves on a one-to-one basis and offering redemption rights within the EU. Lagarde warned, however, that if these rules apply only domestically, they could trigger “regulatory arbitrage.” Under stress, investors would choose to redeem in the eurozone, where reserves are stronger and no redemption fees apply. This concentration of outflows could expose EU reserves to disproportionate redemption risk.
The proposed equivalence regime is designed to compel non-EU issuers to establish local safeguards and segregated reserves or face exclusion from the EU market. This is both a defensive measure and a bid to extend EU regulatory reach beyond its borders.
Strategic Role of the Digital Euro
The debate is inseparable from the ECB’s ongoing work on the Digital Euro. Once stablecoins are tightly constrained, the Digital Euro stands to become the most credible alternative for digital settlement. Its potential advantages include:
- Monetary sovereignty: Direct issuance by the ECB ensures the euro’s primacy in digital payments.
- Payment independence: Reduces reliance on dollar stablecoins and U.S. financial infrastructure.
- Cross-border efficiency: Interoperability with other central bank digital currencies (CBDCs) could enhance the euro’s role in international trade and settlement.
The likely trajectory is for the Digital Euro to expand in retail payments while being positioned as a regulated alternative to dollar-linked stablecoins in cross-border finance.
Europe vs. the U.S.: Diverging Strategies
Dollar-denominated stablecoins, particularly USDT and USDC, have become the backbone of a “shadow dollar system” in emerging markets widely used for trade settlement, hedging, and crypto trading. The U.S. approach has been two-fold: building a domestic regulatory framework while tacitly permitting the global spread of dollar stablecoins, reinforcing dollar dominance.
Europe’s stance is sharply different: dollar stablecoins cannot displace the euro inside the EU, nor can they be allowed to anchor the payment and settlement system. The emerging divergence is clear:
- U.S. strategy: leverage stablecoins to reinforce global dollar primacy.
- EU strategy: use the Digital Euro to build a sovereign alternative.
The Digital Yuan’s Role
China has taken a parallel path, prioritizing monetary sovereignty with the Digital Yuan (e-CNY). Its design aims at:
- Domestic payments substitution: replacing private platforms with a central bank–controlled network.
- Cross-border settlement: promoting e-CNY in Belt and Road trade and infrastructure projects, challenging dollar stablecoins.
Yet, the Digital Yuan faces adoption hurdles, limited network effects, low grassroots acceptance, and strict capital controls. For now, its strength lies in official bilateral trade and government-led projects rather than informal or retail markets where dollar stablecoins dominate.
The Neutral Role of the Digital Franc
Switzerland is taking a different path. The Swiss National Bank is piloting a wholesale CBDC (w-CBDC), a Digital Franc designed for interbank settlement and capital markets, not retail payments. This positions the Digital Franc as a neutral clearing bridge: not competing directly with the euro or the dollar, but acting as a trusted intermediary in cross-CBDC settlement and tokenized securities clearing.
Extended Reading:
The U.S. Anti-CBDC Act
In August 2025, the U.S. Congress incorporated the Anti-CBDC Surveillance State Act into the proposed National Defense Authorization Act (NDAA / SPEED Act). Key provisions include:
- Prohibiting the Federal Reserve from testing, developing, or implementing any form of CBDC.
- Barring the Fed from offering a CBDC to individuals, directly or indirectly.
- Explicitly stating that the Fed cannot issue a digital dollar without Congressional authorization.
This reflects Washington’s strong resistance to a central bank digital dollar, framed around protecting privacy and preventing government overreach. By contrast:
- Europe is actively designing a Digital Euro with built-in privacy and risk-mitigation features.
- China is pushing the Digital Yuan with an emphasis on state control and monetary sovereignty.
- Switzerland is exploring wholesale CBDC applications to reinforce financial infrastructure integrity.
The U.S. position highlights its reliance on privately issued stablecoins as the dollar’s digital proxy, potentially ceding ground in global digital finance standard-setting to Europe and Asia.