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Digital gold rush: How Stablecoins threaten monetary sovereignty globally
Europe's digital euro has got off to a late start in terms of geopolitical leverage in the digital era. Photo: File
Imagine a world where the dollar, already the lifeblood of global finance, morphs into a digital juggernaut, coursing through blockchain veins to tighten US's grip on the world's capital. This isn't science fiction — it's happening now, with stablecoins, those dollar-pegged crypto tokens, reshaping the financial landscape.
As Jürgen Schaaf, an adviser to the European Central Bank, warned on 28 July, the rise of these instruments risks 'dollarisation' of the eurozone, a phenomenon that could kneecap the ECB's monetary sovereignty. This isn't only a European problem; it's a global wake-up call. The US is leveraging stablecoins to harvest capital worldwide and the rest of the world needs to decide — adapt or be subsumed.
Stablecoins — cryptocurrencies pegged to assets such as the US dollar — are designed to maintain a stable value while enabling frictionless, cross-border transactions on blockchain networks, independent of traditional banking infrastructure. As of 28 July, the global stablecoin market has surged to
Financial Times
. By contrast,
Yet the foundation of this emerging digital currency ecosystem remains precarious. In a 24 June 2025 report,
Europe's response? The digital euro, which Schaaf calls a 'solid line of defence'.
Yet, Europe faces a steep climb. The dollar's network effects — its entrenched role in trade, reserves and now digital finance — are formidable.
At its core, the stablecoin debate is less about currency mechanics and more about geopolitical leverage in the digital era. The US is leveraging dollar-backed tokens to reinforce its financial primacy, attracting global capital flows while other jurisdictions struggle to respond. The eurozone's efforts — through the digital euro and MiCA-compliant stablecoins — represent an attempt to reassert monetary sovereignty. However, as Jürgen Schaaf has argued, effective countermeasures require global regulatory alignment. In the absence of coordinated standards, regulatory arbitrage will probably benefit the US, where the recently enacted Guiding and Establishing National Innovation for US Stablecoins (Genius) Act provides a more permissive framework.
For emerging markets, already susceptible to external monetary shocks, the risks of unchecked dollarisation in the digital realm are even more acute — as underscored by warnings from the Bank for International Settlements.
Looking ahead, the policy roadmap is clear. Europe must accelerate development of the digital euro and actively support euro-denominated stablecoins — initiatives like Deutsche Bank's
At the international level, regulators must work towards a coherent framework that addresses the systemic risks of stablecoins — ranging from illicit finance to reserve opacity — without stifling technological progress. Central banks, too, must adapt with greater urgency, combining institutional credibility with the operational agility of the private sector.
Meanwhile, the US is moving swiftly. Its stablecoin strategy, underpinned by
They harvest capital, influence and control, leaving other economies to play catch-up or pay tribute. Europe's digital euro is a start, but it's a race against a US that's already lapping the field. The question isn't just whether the euro can compete, it's whether any currency can. In this digital gold rush, the dollar's grip is tightening and the world must decide how to respond before the blockchain binds us all.
Dr Imran Khalid is a freelance columnist on international affairs based in Karachi, Pakistan.
