Euro-Backed Stablecoins Could Support Europe’s Financial Sovereignty Amid USD Dominance

• Stablecoin adoption in Europe is accelerating, yet the region remains heavily dependent on USD-backed stablecoins instead of embracing euro-backed alternatives.

• The introduction of the Markets in Crypto-Assets (MiCA) regulation is set to encourage the use of euro-backed stablecoins, providing a strategic alternative to the dollar and enhancing Europe’s monetary autonomy.

• According to Alexander Hoeptner, CEO of AllUnity, euro-backed stablecoins could play a vital role in complementing the digital euro, fostering financial sovereignty and reducing reliance on US regulatory frameworks.

Europe’s stablecoin market grows rapidly, yet USD dominance persists. MiCA regulation aims to boost euro-backed stablecoins, enhancing financial sovereignty and reducing dollar dependence.

Europe’s Stablecoin Paradox: Rising Adoption Amid USD Dominance

Stablecoin usage across Europe has surged in recent years, reflecting a growing appetite for digital assets within the region. However, this growth is paradoxical: despite increased adoption, the overwhelming majority of stablecoins used are still backed by the US dollar rather than the euro. Data from Crypto Rank reveals that while North America leads with a 42% share of stablecoin transactions, Europe has made a significant leap from 16% to 34% between 2024 and 2025. Yet, 99.8% of the total stablecoin supply remains USD-based, underscoring the persistent dominance of the dollar in digital finance.

This heavy reliance on USD-backed stablecoins poses a strategic challenge for Europe, as it increases exposure to US monetary policy and regulatory decisions. European leaders are increasingly concerned about the potential erosion of the euro’s role in the digital economy, emphasizing the need for euro-backed alternatives to safeguard monetary sovereignty.

MiCA’s Role in Shaping Europe’s Stablecoin Landscape

The Markets in Crypto-Assets (MiCA) regulatory framework, implemented in December 2024, represents a pivotal development for Europe’s crypto ecosystem. Prior to MiCA, the lack of a clear regulatory environment disincentivized the adoption of euro-backed stablecoins, leaving USD-backed options as the default choice due to their established liquidity and stability.

MiCA introduces a harmonized regulatory approach across EU member states, creating a safer and more predictable environment for euro-backed stablecoins. This regulatory clarity is expected to encourage issuers and users to shift towards euro-based digital assets, reducing dependence on the US financial system.

Alexander Hoeptner, CEO of AllUnity, highlights the risks associated with continued reliance on USD-backed stablecoins: “The current US administration poses a risk of uncertainty to the stability of the US monetary system and the regulatory framework of the digital economy despite the passed GENIUS Act… widespread usage could form a negative dependence that could be exploited against EU interests.”

With MiCA in place, Europe is better positioned to foster a stable and competitive euro-backed stablecoin market, supporting the broader goal of financial sovereignty.

The Promise and Potential of Euro-Backed Stablecoins

Euro-backed stablecoins offer a compelling alternative for European users and businesses seeking to transact digitally without defaulting to the US dollar. These stablecoins serve as a bridge currency for cross-border trade within and beyond Europe, facilitating smoother international payments while mitigating foreign exchange risks.

Hoeptner further explains, “This would not expose the European users to regulatory uncertainty and secure also the digital identity within Europe which is necessary for coin usage.” Despite MiCA’s regulatory progress, Europe still faces challenges due to the absence of a unified monetary policy comparable to the US, which complicates efforts to promote widespread stablecoin adoption.

Traditional Financial Institutions: Navigating Change

Legacy financial institutions in Europe often approach digital currency adoption with caution, given their longstanding investment in traditional banking infrastructure. The rise of euro-backed stablecoins challenges conventional systems by introducing programmable, flexible digital assets that could disrupt established financial models.

Hoeptner warns that resistance from these institutions could be detrimental: “The fear of adoption of the old establishment is the biggest risk which essentially could be of great harm when instead of tackling the risks of digitization, rejection leads to an ultimate dependence on a non-European solution.”

Rather than viewing euro-backed stablecoins as competitors, these institutions could leverage them alongside the digital euro — the official government-backed digital currency. This dual approach would combine the stability and regulatory oversight of the digital euro with the innovation and programmability of private stablecoins, offering a comprehensive digital financial ecosystem.

Reducing Dollar Dependence and Enhancing Europe’s Financial Sovereignty

While USD-backed stablecoins currently dominate Europe’s digital asset landscape, MiCA’s regulatory framework paves the way for euro-backed stablecoins to gain traction. Increasing adoption of euro-backed stablecoins can significantly reduce Europe’s reliance on the US dollar, strengthening the euro’s international role and enhancing financial sovereignty.

Integrating euro-backed stablecoins with the digital euro could boost Europe’s competitiveness in the global digital economy, offering users and businesses a wider array of secure, efficient, and innovative payment options.

Conclusion

Europe stands at a critical juncture in its digital finance evolution. Although USD-backed stablecoins currently dominate, the introduction of MiCA regulation and the rise of euro-backed stablecoins offer a promising path toward greater monetary independence. By embracing these digital assets alongside the digital euro, Europe can enhance its financial sovereignty, reduce exposure to foreign regulatory risks, and foster a more resilient and competitive digital economy. The coming years will be decisive in determining how effectively Europe capitalizes on this opportunity to reshape its stablecoin landscape.