Stablecoins vs Digital Euro: what they are and how do they differ?

What are stablecoins? 

Stablecoins are crypto-tokens designed to stay at a stable value by “pegging” (linking) their value to another asset, typically the US dollar at a 1:1 ratio. Issuers of stablecoins promise that each token is backed by cash or traditional financial assets, such as Treasury bills. This way, they may look more stable and safer than volatile cryptocurrencies like Bitcoin.

The two dominant dollar-based stablecoins are Tether (USDT) and Circle's USD Coin (USDC), and they account for roughly 90% of the $250+ billion global stablecoin market, which is 99% denominated in US dollars. Euro-denominated stablecoins remain marginal, with a market capitalization of less than €350 million.
Sadly, but not surprisingly, they are used widely for illicit transactions (they were the preferred payment method for 60% of all criminal transactions conducted using cryptocurrency in 2023, according to data reported in an INET's article).

How stablecoins work and why they’re risky

Basically, a private company (like Tether) issues stablecoins and holds equivalent reserves for each token. But… Can you really trust a private company to tell the truth when it is moved by a strong stimulus to leverage its operations and earn as much profit as possible? This is debatable, yet many people want to believe it.

Typically, they act as a bridge between crypto markets and traditional finance: traders use them to move quickly between exchanges, and some households, in emerging economies, hold them as a digital form of dollars.

The truth is that despite their name, stablecoins aren't necessarily stable. During market stress, they can even lose their dollar peg.

During the Silicon Valley Bank collapse (2023), even leading stablecoins “broke the peg,” losing their 1:1 value before recovering, requiring a federal bailout to prevent a complete collapse. 

Imagine this: you put US$100 into a "stablecoin," thinking it's safe. It's supposed to be US$100 when you take it out. But when you check your balance, you have... less than US$100.

Where did the rest of your money go? It simply vanished.

The crucial takeaway here is: stablecoins are not money. They are private financial assets, and despite the name, they are vulnerable to market forces, speculation, and risk. Your 'stable' US$100 can simply disappear.

Analysts at the Bank for International Settlements (BIS) note that stablecoins “perform poorly as money.” And guess why? Because they lack central bank backing. 

Also, the US Securities and Exchange Commission (SEC) highlighted that ignoring the true, high-risk structure of the stablecoin market can lead to feeding a dangerous industry narrative that these digital assets are safe and equivalent to the U.S. dollar — which they absolutely are not.

What if the issuer has troubles? The reality is that most people cannot deal directly with the issuer. In fact, over 90% of stablecoins are sold to the public through intermediaries like crypto trading platforms. So, if a retail buyer wants to get their money back, they can only go to their intermediary, and they have no contract or direct right to demand $1 from the original issuer. If the issuer fails, members of the public have no claim to the assets in that reserve.
Is this a system you would define as stable?

The regulatory framework: the GENIUS Act (US) and MiCA (EU)

In July 2025, the GENIUS Act — legislation that aims to legalize privately issued, uninsured stablecoins — established federal oversight for them in the United States. Critics, including scholars like Arthur E. Wilmarth, warn that weak safeguards could turn them into a new “shadow-banking 2.0” system, prone to runs and contagion.
We should not forget that under the GENIUS Act, Big Tech firms and other giant commercial enterprises can acquire non-bank stablecoin issuers.
This should ring a warning bell: if tech giants from Amazon to X are able to issue stablecoins, they could potentially become new “too-big-to-fail” entities that might spread future crypto crashes across the entire global economy.
While the US leans on a permissive legal framework to stimulate private innovation, the EU is enforcing the Markets in Crypto-Assets (MiCA) regulation framework (2024–25).
Adopted in 2023, it came into full effect on 30 December 2024, with the aim of providing legal clarity, protecting investors, ensuring transparency, and stabilising the cryptocurrency market.
Euro-denominated stablecoins such as SocGen’s EUR CoinVertible, AllUnity’s EURAU, and ODDO BHF’s EUROD are the first to launch under this regime.

The MiCA and the GENIUS Act represent fundamentally different regulatory approaches to stablecoins.

The core difference is that MiCA is significantly more strict and conservative, focusing on safeguarding financial stability and the EU's monetary sovereignty, while the GENIUS Act aims to be more flexible, prioritising private sector innovation and promoting the global use of the US dollar (a strategy the has been reported as "cryptomercantilism”).

Stablecoins and the digital euro: how they differ

Now that we know a bit more about stablecoins… the question is: in what way are they different from central bank digital currencies, such as the digital euro?
Well, first of all, we have to remember that central bank money — cash and reserves — is public money guaranteed by a public institution and always redeemable at par.

The first difference is the issuer: while stablecoins are private money created by private companies, CBDCs are always issued and backed by a public central bank — in the case of the digital euro, the European Central Bank (ECB). A central bank digital currency (CBDC) would simply be a digital version of cash.

For instance, the ECB defines the digital euro as a retail CBDC intended to complement cash, not replace it.
This also defines who is responsible for the legal claim — private issuers versus the central bank — and the backing: while stablecoins rely on short-term assets (cash, Treasury bills), the digital euro will always be covered by a full sovereign guarantee (for more info about the digital euro, read here).

And here we come to the biggest feature: how these two different forms of digital money manage the risk of losses. It’s pretty straightforward. While stablecoins could be subject to a possible ‘de-peg or run’, this is not the case for the digital euro. Put simply, the ECB cannot fail  or run away with your money, because it is the sole issuer of the euro. In other words  it is impossible for the ECB to run out of liquidity or face a classic bank run like a regular bank.

So again, despite the name, the truth is that stablecoins are actually much less stable and safe than a public form of money. What is often underrated and forgotten is that money is a public good, and its strength is firmly based on the trust that people have in the state and public institutions. And this leads to another crucial feature of the digital euro: how it strengthens European sovereignty in comparison to foreign private stablecoins.

Why the digital euro matters for European monetary autonomy

Economist Philip Lane describes the digital euro as a “safeguard of Europe’s monetary autonomy.” By offering a trusted public digital option, the digital euro would reduce dependence on non-European payment networks, and avoid dependence on private USD-backed stablecoins like USDT or USDC.
Heavy dependence on non-European payment schemes is a financial vulnerability for all of us in Europe.
As Piero Cipollone, from the ECB,  highlighted, “Today, 65% of card payments in the euro area are processed by two non-European companies, and 13 of the 20 euro area countries rely entirely on these international schemes”.
In a more and more fragmented world, this reliance poses a strategic risk, as access to financial infrastructure can be restricted as a tool of coercion imposed on Europe by third countries. And this is why ensuring a common European payment solution is a critical precondition for Europe's independence and overall financial resilience.

Why the Trump administration is incentivising stablecoins and risks for EU monetary sovereignty

One question may arise from what we are seeing in the stablecoin market and the willingness to promote them by the Trump administration: why is the US government adopting such a stance? On the one hand, this could be explained by a political approach that sees private economic initiative, liberalism, and the free market as the main drivers of the economy, and by an inclination towards the financialisation of the real economy. For instance, the “CBDC Anti-Surveillance State” Act, that is still going through the legislative process in the US Congress, would forbid the Federal Reserve from introducing a retail central bank digital currency. In other words, the world’s leading monetary authority — the Fed — is likely to find itself entirely shut out from experimenting with public digital coins.

We should not overlook the intersection of politics and the cryptocurrency market during the Trump administration. President Trump has become a vocal and enthusiastic advocate for digital assets, earning him the nickname the first 'crypto president'. His administration has pursued policies highly favourable to the industry—from easing regulations to installing crypto-friendly leaders in regulatory agencies.

However, major news outlets, including the Financial Times, report that this political pivot is mirrored by a massive financial one. The Trump family has built a large and highly profitable crypto business empire, involving ventures like memecoins and decentralised finance platforms. This personal business, which includes participation from family members and close associates, is reported to have generated over one billion dollars in pre-tax profits. While the White House emphasises that the administration is simply fostering innovation, critics and ethics experts have raised concerns that the administration's policies benefit the family's extensive financial interests directly in a way that is unprecedented for a US president.

And this is part of the story, but not the full picture.
As the ECB noted, the US administration supports stablecoins as a strategy to expand the dollar's digital presence worldwide and reduce US borrowing costs by channeling stablecoin reserve holdings into US Treasuries.

How is that? US Treasuries are debt instruments that the US government sells. The yield on a bond is effectively the interest rate that the government pays to borrow money. Bond prices and yields have an inverse relationship. This happens for two main reasons. First, when market interest rates rise, new bonds pay more and old bonds become less attractive, so their price falls and the yield rises to compensate. Second, when a bond becomes riskier, investors want a higher yield to be compensated, so they pay a lower price. In both cases the same rule applies: price down means yield up, price up means yield down.
So, increased demand for US Treasuries drives their price up, which simultaneously drives their yield (borrowing cost) down.

In summary, the US government is incentivising the expansion of the stablecoin industry because it creates a reliable source of capital that continuously purchases its debt, effectively making it cheaper for the US government to run its operations and finance its deficits — all without involving the Fed and without a proper monetary policy from the central bank.

Is this the beginning of a decentralised, private monetary policy, alternative to that of public central banks?
This is one of the points that concerns the ECB the most. 

Frankfurt is concerned not only that this approach may affect and weaken the effectiveness of monetary policies but also that the rapid growth of dollar-linked stablecoins threatens its ability to control monetary policy in the eurozone. Jürgen Schaaf, an ECB adviser in market infrastructure and payments, warned that widespread stablecoin adoption could leave the eurozone in a situation similar to “dollarised” emerging economies, where the ECB would struggle to set interest rates. He wrote “Should U.S. dollar stablecoins become widely used in the euro area — whether for payments, savings, or settlement — the ECB’s control over monetary conditions could be weakened”.

Actually, it is not only a matter for central banks. As the ECB notes, if interest-bearing stablecoins became common, they could divert deposits from traditional banks, jeopardizing financial intermediation. This would be problematic for European banks, which still play a central role in the financial system — and another reason to consider that the risks associated with the widespread dissemination of stablecoins, instead of a central bank digital currency, are relevant and long-term.
This is why a public, credible, safer, and well-regulated alternative such as the digital euro should be implemented.

What is the EU deciding on the digital euro?

The debate around  how stablecoins are going to invade the global market is relatively new, but it already poses serious questions for financial stability in the US and elsewhere. The US has played its shot, and now it’s entirely up to European leaders to determine their next steps.

But could simply promoting euro-backed stablecoins or strengthening the markets in Crypto-Assets (MiCA) regulation be enough?
The truth is that accelerating plans for a strong digital euro would be a strategic move on the international chessboard to protect the Eurozone's monetary control.

The new draft report on the digital euro legislation will be presented at the end of October in the European Parliament, and the final vote in the Economic and Monetary Affairs Committee is expected in May 2026. At the same time, Member States are working on their position in the Council, aiming to reach a general approach by the end of the year. Then, the two co-legislators will have to enter inter-institutional negotiations and find a common position.

The critical question facing EU institutions is whether they will deliver a trustworthy, public solution that the public will actually use. If they approve a digital euro that includes significant constraints (such as a proposed holding limit of 3000 euro per wallet, a very limited number of intermediaries or high costs for merchants) it will simply dampen public and business appeal. 

Should the official digital currency fail to be attractive, it risks holding the door wide open for the broader dissemination of private stablecoins instead.
Will the EU institutions push for a trustful, public, and transparent solution for European citizens and businesses — or will they play for the benefit of other teams?