Latest news with #JürgenSchaaf
Yahoo
30-07-2025
- Business
- Yahoo
ECB Says U.S.-Backed Stablecoin Use in EU Could Weaken Its Monetary Autonomy
Widespread use of U.S. dollar-denominated stablecoins in the European Union (EU) for payments or settlement could damage the European Central Bank's control over monetary conditions, an ECB adviser said. If U.S.-backed stablecoins, digital assets that are backed by the dollar, gain traction for use in the EU, the effect could be similar to the impact of the U.S. dollar on developing economies, Jürgen Schaaf said in a blog post on Monday. In particular, they have made it harder for policymakers to set interest rates and control money supply. "This encroachment, though gradual, could echo patterns observed in dollarised economies, especially if users seek perceived safety or yield advantages that are not available in euro-denominated instruments," Schaaf said. The biggest stablecoins are Tether's USDT and Circle's USDC, which together make up more than 80% of the total stablecoin market cap, which climbed to $271.8 billion following the signing into law of a U.S. stablecoin act on July 19. Schaaf described the U.S. law as similar to the EU's Markets in Crypto Assets (MiCA) regulation, but more lenient in some areas. The implementation of the act could result in the stablecoin market growing to $2 trillion by the end of 2028, investment bank Standard Chartered said in April. "U.S. dollar stablecoins may cement their early dominance unless credible euro alternatives materialise," Schaaf wrote. Such dominance "would provide the United States with strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence." In cross-border transactions, dollar-denominated stablecoins could compete directly with euro-based instruments, Schaaf said. They could also be heavily relied on for tokenized settlements as that process requires a digital representation of cash to settle transactions, he added. To mitigate against the threat, Schaaf suggested that more support should be offered for euro-backed stablecoins. He also suggested the digital euro — a digital currency that would be issued by the ECB — would have a role to play. "The digital euro promises to be a robust line of defence of European monetary sovereignty," Schaaf said. The ECB is not the only regulator concerned about the dominance of stablecoins that are pegged to the greenback. China is also considering the need for a regulated offshore yuan (CNH) stablecoin, Animoca Group President Evan Ayuang said in an interview with CoinDesk last week. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Khaleej Times
28-07-2025
- Business
- Khaleej Times
Dollar stablecoins threaten Europe's monetary autonomy, ECB blog argues
The dollar's early dominance of stablecoins gives the U.S. an advantage that could ultimately push up borrowing costs for Europe, reduce the ECB's autonomy and increase geopolitical dependency on the U.S., an ECB blog post argued on Monday. Stablecoins, crypto assets pegged to a currency such as the dollar, have gained popularity in recent years and got a big boost earlier this month when U.S. President Donald Trump signed a law to create a regulatory regime, aimed at cementing the dollar's status as the global reserve currency. "Such dominance of the U.S. dollar would provide the United States with strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence," ECB adviser Jürgen Schaaf said in a post that does not necessarily reflect the ECB's own views. "For Europe, this would mean higher financing costs relative to the United States, reduced monetary policy autonomy and geopolitical dependency," he added. If dollar-based stablecoins become widely used in the euro area, for payments, savings or settlement, the ECB's control over monetary conditions could be weakened, Schaaf argued. Dollar-pegged stablecoins issued by Tether and Circle have dominated the global market and the share of euro-denominated stablecoins remains marginal, with market capitalisation of less than 350 million euros, the blog post said. Europe should thus act quickly, creating the digital version of its euro currency, a project, that is being held up by legislative delays, and should foster the creation of more euro-based stablecoins. The EU should also foster the use of distributed ledger technology to speed up cheap cross-border payments, the blog argued. "Finally, stronger global coordination on stablecoin regulation is pivotal," the blog said. "If we forgo a common approach, we risk fuelling instability, regulatory arbitrage and global U.S. dollar dominance."
Finextra
28-07-2025
- Business
- Finextra
Europe must provide more support for stablecoins or face subservience to the US dollar
Jürgen Schaaf, an economist and advisor to the European Central Bank's Market Infrastructure and Payments division, says more support should be provided for properly regulated euro-denominated stablecoins to ward off the threat posed by US dollar-backed tokens. 0 US dollar-based stablecoins currently account for some 99% of total stablecoin market capitalisation. In contrast, euro-denominated stablecoins remain marginal - with market capitalisation of less than €350 million. Their appeal lies in functioning as a blockchain-based money equivalent which is liquid, globally transferable, and perceived as a stable and solid store of value. Given their growing scale and complexity, stablecoins also present knotty challenges for financial stability, monetary sovereignty, the smooth functioning of payment systems and international policy coordination Stablecoins still remain dwarfed by 'conventional' financial assets. However, they are starting to come out of their niche and become more entangled with traditional financial institutions, creating potential threats to financial stability. Says Schaaf: "A disorderly collapse could reverberate across the financial system, and the risk of contagion is a growing concern for central banks." In its Annual Economic Report 2025, the Bank for International Settlements (BIS) issued a stark warning about stablecoins. Its concerns include the potential for stablecoins to undermine monetary sovereignty, transparency issues and the risk of capital flight from emerging economies. The BIS pointed out that many stablecoins have seen substantial deviations from par, highlighting the 'fragility of their peg'. The emergence of interest-bearing stablecoins also throws up more challenges, in that, if more business started using them, they could divert deposits from traditional banks, which could jeopardise financial intermediation and hamper credit availability. This would be a bigger issue in Europe, where banks play a central role in the financial system and deposits are their main source of refinancing. Should US 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, warns Schaaf. "This encroachment, though gradual, could echo patterns observed in dollarised economies, especially if users seek perceived safety or yield advantages that are not available in euro-denominated instruments," he says. "Such dynamics would be difficult to reverse given the network character of stablecoins and the economies of scale in this context. The larger their footprint, the harder these would be to unwind. If the use of US dollar-denominated stablecoins continues to increase through traditional channels, they may compete directly with euro-based instruments in cross-border transactions. In tokenised settlement, where a reliable digital cash equivalent is key, US dollar stablecoins may cement their early dominance unless credible euro alternatives materialise." The US Administration has made it clear - through executive orders, congressional testimony and social media - that its support for stablecoins goes beyond just encouraging technological innovation. The goal is twofold: to protect the US dollar's global dominance by expanding its use on digital platforms worldwide; and to reduce borrowing costs by increasing demand for US Treasuries through stablecoin reserve holdings. If Europe is to come unscathed thropugh the maelstrom, policy makers must adapt their thinking and embrace the coming disruption, says Schaaf. "While the neutrality of public institutions is often preferred, a strategic blind spot in this space could prove costly," he says. "Euro-based stablecoins, if designed to high standards and effective risk mitigation, could serve legitimate market needs. They could also reinforce the international role of the euro." He contends that Europe's stable institutional framework and rules-based approach provide a solid foundation for mitigating the risks posed. "If the Eurosystem and the European Union can build on this advantage - through robust regulation, infrastructure investment and digital currency innovation - the euro could emerge from this period of change as a stronger currency.," he concludes"In a world of shifting sands, the euro has the potential to be the bedrock on which others can build."
Yahoo
28-07-2025
- Business
- Yahoo
Dollar stablecoins threaten Europe's monetary autonomy, ECB blog argues
FRANKFURT (Reuters) -The dollar's early dominance of stablecoins gives the U.S. an advantage that could ultimately push up borrowing costs for Europe, reduce the ECB's autonomy and increase geopolitical dependency on the U.S., an ECB blog post argued on Monday. Stablecoins, crypto assets pegged to a currency such as the dollar, have gained popularity in recent years and got a big boost earlier this month when U.S. President Donald Trump signed a law to create a regulatory regime, aimed at cementing the dollar's status as the global reserve currency. "Such dominance of the U.S. dollar would provide the United States with strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence," ECB adviser Jürgen Schaaf said in a post that does not necessarily reflect the ECB's own views. "For Europe, this would mean higher financing costs relative to the United States, reduced monetary policy autonomy and geopolitical dependency," he added. If dollar-based stablecoins become widely used in the euro area, for payments, savings or settlement, the ECB's control over monetary conditions could be weakened, Schaaf argued. Dollar-pegged stablecoins issued by Tether and Circle have dominated the global market and the share of euro-denominated stablecoins remains marginal, with market capitalisation of less than 350 million euros, the blog post said. Europe should thus act quickly, creating the digital version of its euro currency, a project, that is being held up by legislative delays, and should foster the creation of more euro-based stablecoins. The EU should also foster the use of distributed ledger technology to speed up cheap cross-border payments, the blog argued. "Finally, stronger global coordination on stablecoin regulation is pivotal," the blog said. "If we forgo a common approach, we risk fuelling instability, regulatory arbitrage and global U.S. dollar dominance." Sign in to access your portfolio
Zawya
28-07-2025
- Business
- Zawya
Dollar stablecoins threaten Europe's monetary autonomy, ECB blog argues
The dollar's early dominance of stablecoins gives the U.S. an advantage that could ultimately push up borrowing costs for Europe, reduce the ECB's autonomy and increase geopolitical dependency on the U.S., an ECB blog post argued on Monday. Stablecoins, crypto assets pegged to a currency such as the dollar, have gained popularity in recent years and got a big boost earlier this month when U.S. President Donald Trump signed a law to create a regulatory regime, aimed at cementing the dollar's status as the global reserve currency. "Such dominance of the U.S. dollar would provide the United States with strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence," ECB adviser Jürgen Schaaf said in a post that does not necessarily reflect the ECB's own views. "For Europe, this would mean higher financing costs relative to the United States, reduced monetary policy autonomy and geopolitical dependency," he added. If dollar-based stablecoins become widely used in the euro area, for payments, savings or settlement, the ECB's control over monetary conditions could be weakened, Schaaf argued. Dollar-pegged stablecoins issued by Tether and Circle have dominated the global market and the share of euro-denominated stablecoins remains marginal, with market capitalisation of less than 350 million euros, the blog post said. Europe should thus act quickly, creating the digital version of its euro currency, a project, that is being held up by legislative delays, and should foster the creation of more euro-based stablecoins. The EU should also foster the use of distributed ledger technology to speed up cheap cross-border payments, the blog argued. "Finally, stronger global coordination on stablecoin regulation is pivotal," the blog said. "If we forgo a common approach, we risk fuelling instability, regulatory arbitrage and global U.S. dollar dominance." (Reporting by Balazs Koranyi, Editing by Louise Heavens)
