6 Minutes
Guest perspective: Europe is losing the digital currency race
The following is an opinion contribution originally made by Eneko Knörr, CEO and Co‑Founder of Stabolut. As the global crypto ecosystem matures, Europe faces a stark choice: foster private innovation in euro-denominated stablecoins or double down on centralized alternatives that could undermine monetary sovereignty and privacy. Recent signals from inside the European Central Bank confirm a growing unease that EU policy—most notably the Markets in Crypto‑Assets (MiCA) regulation—may be producing precisely the wrong outcome.
The digital currency imbalance: numbers that speak volumes
There’s a glaring mismatch between Europe’s real economic weight in the traditional economy and its presence on blockchains. Globally, non‑USD currencies account for roughly 73% of GDP, more than half of SWIFT payments and over 40% of central bank reserves. Yet in crypto markets the euro is nearly invisible.
Data from market aggregators show privately issued, dollar‑pegged stablecoins approach a combined market capitalization in the hundreds of billions of dollars—near $300 billion—while euro‑pegged options struggle to exceed roughly €450 million. That equates to a market share near 0.15% for euro stablecoins: effectively a rounding error. Put differently, for every €1 transacted on public ledgers, nearly €700 worth of value is denominated in US dollars. This heavy dollarization of blockchain activity is more than a market trend; it’s a strategic vulnerability for Europe’s currency influence in the digital era.
Why the gap matters for monetary influence
When commercial activity, trade settlement, and decentralized finance overwhelmingly rely on dollar‑backed digital money, the United States gains disproportionate leverage in the new financial layer. For the eurozone, the loss of digital market share reduces options for international payments, weakens monetary policy reach in cross‑border commerce, and increases exposure to sanctions and financial plumbing centered on another jurisdiction’s currency.
MiCA’s transaction cap: safety measure or self‑sabotage?
MiCA was intended to bring clarity to crypto markets, paving the way for consumer protection and market integrity. Yet one provision stands out as particularly damaging to euro stablecoin viability: a €200 million daily transaction cap for electronic‑money tokens (EMTs) categorized as “significant.” In practical terms, this cap makes it impossible for any private euro stablecoin to scale to the levels required for global trade or deep DeFi usage. For context, leading dollar stablecoins like Tether (USDT) often report tens of billions of dollars in daily volume—orders of magnitude above the MiCA ceiling.
That ceiling is not a minor regulatory inconvenience; it is a structural limit that prevents euro stablecoins from competing. Whether intentional or not, the result is clear: private issuers face a glass ceiling that favors centralized alternatives.
The political economy behind the cap
Critics argue the cap effectively protects the path for a state‑issued Central Bank Digital Currency (CBDC) by neutering private contenders. Policymakers may see this as a way to control systemic risk. But the unintended consequence is the shrinkage of private R&D, fewer commercial use cases, and a weaker ecosystem to support cross‑border euro settlement on permissionless rails.
The Digital Euro trade‑off: convenience vs. privacy
Public authorities are understandably focused on safety, oversight, and financial stability. But a pan‑European CBDC represents a trade‑off that goes beyond speed and cost. Unlike cash—which offers anonymous, offline peer‑to‑peer exchange—a fully centralized CBDC could create a ledger of granular individual spending. This introduces unprecedented surveillance capacity into the payments layer and centralizes control of money in ways that many citizens would find unacceptable.
If the EU’s policy outcome is to stifle private euro stablecoins and pivot entirely to a Digital Euro, the architecture of money could become not just faster but fundamentally more transparent to the state. That shift has real implications for civil liberties and the trust citizens place in public money.
Global competitors are not waiting
While Brussels debates regulatory guardrails, other jurisdictions are actively enabling private stablecoin issuance or exploring hybrid models. Japan has moved ahead with legislation to support yen‑pegged stablecoins. China is considering ways to integrate digital yuan initiatives with broader internationalization goals. These countries view private‑sector stablecoins as strategic tools—not threats—and are positioning themselves to capture the benefits of a digital monetary economy.
If the eurozone wants to avoid becoming a spectator, it needs to rethink whether protectionist regulation and a single‑minded push for a CBDC are the right responses to a rapidly evolving private market.
A pragmatic policy playbook for the euro
To reverse the current trajectory and reclaim relevance in digital money markets, EU policymakers should consider a targeted set of reforms that balance safety with competitiveness:
- Remove the €200 million cap on EMT daily transactions so market demand—not arbitrary limits—determines scale.
- Create a pan‑EU fast‑track licensing path for qualified euro stablecoin issuers to reduce fragmentation and time‑to‑market.
- Prioritize regulatory clarity and market infrastructure over an exclusive focus on a centralized CBDC. At minimum, proceed cautiously with any Digital Euro rollout that could jeopardize privacy or crowd out private innovation.
Why this matters now
The choice is urgent. Market share is not merely an economic statistic; it shapes who sets standards, who builds infrastructure, and whose currency underpins future layers of financial innovation. Right now, that future is being developed largely around American dollar digital money. Europe can either adapt its regulations to empower its private sector to build euro‑denominated stablecoins at scale, or it can risk permanent marginalization in the architecture of global digital finance.
For policymakers, entrepreneurs, and investors, the clock is ticking. The EU’s next decisions will determine whether the euro is a leading digital currency or a secondary participant in a dollar‑dominated financial web.
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