Europe’s stablecoin market is still overwhelmingly tied to the US dollar, and that imbalance is drawing sharper warnings from policymakers. Current assessments cited in the report show that nearly 98% of the European stablecoin market is pegged to the dollar, while the broader stablecoin sector has grown to $310 billion. With USD-backed tokens such as Tether and USDC dominating activity, officials are increasingly focused on the financial risks and the possibility that Europe could lose ground in control over its own monetary system.
Dollar-backed stablecoins deepen fears of digital dollarization
Christine Lagarde said the fast expansion of stablecoins could create new vulnerabilities in the financial system and lead to a loss of control. She also argued that support for euro-denominated digital assets remains weak. That gap matters. If the stablecoin market expands into the multi-trillion-dollar range, as some experts expect, and Europe still lacks stronger euro-based alternatives, capital in the region could keep shifting toward dollar-backed digital assets.
That prospect has revived concerns over “digital dollarization” in Europe. The issue reaches beyond payments. A larger role for USD-linked tokens could erode the euro’s position in international fund transfers and narrow Europe’s room to act independently on monetary policy.
Beau backs a mixed model built on euro-based settlement
Denis Beau, first deputy governor of the French central bank, told CoinDesk that private-sector involvement in digital euro solutions is essential for Europe’s long-term economic development. In his view, Europe’s tokenized financial system should be built on the euro as the core unit for payments and settlement, while remaining layered on top of the existing two-tier monetary system.
Beau set out a “triple objective” for Europe: adapt central bank services, develop tokenized private money issued by licensed financial institutions, and strengthen the MiCA regulatory framework. He said public and private actors should work in a complementary way so the euro can preserve its reliability in a tokenized financial system and keep its standing in global transfers.
This position closely matches the approach taken by the Qivalis consortium, which includes 12 major European banks such as ING, BBVA, and BNP Paribas. Qivalis is preparing to launch a private sector-backed digital euro later this year. Its CEO, Jan-Oliver Sell, has also warned that without euro-based digital assets, Europe risks losing digital and financial sovereignty.
Lagarde points to a central bank digital euro by 2029
Lagarde has taken a more cautious view of privately issued tokenized money. She said a central bank-issued digital euro could offer a safer alternative to USD-based tokens and help contain financial stability risks. Her timeline sets 2029 as the target year for a centrally managed digital euro.
At the same time, Beau said the European Central Bank has already started pilots for token-based payment and settlement systems, with the first concrete results expected before the end of this year. Projects such as Pontes are expected to hold an important place in that work. With dollar-pegged stablecoins still accounting for almost all of the market, the divide between these policy approaches is now feeding directly into Europe’s digital money debate.