The European Union faces a critical juncture in the evolution of digital money. The rise of privately issued stablecoins and central bank digital currencies (CBDCs) signifies a shift from centralized payments to decentralized finance (DeFi). This transition promises faster, programmable, and borderless payments but operates on different principles and institutional foundations, marking a departure from the centralized architecture of modern payment systems.
The EU’s payment infrastructure is advanced and integrated, but it faces several frictions. Cross-border payments are slow and expensive due to multiple intermediaries and compliance checks. Large transactions lack real-time tracking and smart payment capabilities. DeFi, built on distributed ledger technology (DLT), offers programmability, transparency, and interoperability, but it also introduces risks such as code errors, governance issues, and cyber vulnerabilities. The challenge for policymakers is to integrate decentralized infrastructure into a regulated framework that preserves trust.
Tokenized deposits and stablecoins are options for fast, programmable digital payments within a decentralized system. Tokenized deposits, regulated and protected by deposit insurance, represent claims on existing deposit accounts. Stablecoins, created by private companies for crypto markets, maintain stable values backed by reserves of cash or short-term securities. CBDCs, digital equivalents of cash, are state-guaranteed and universally convertible, anchoring the monetary system but not constituting its bulk. In the euro area, over 90% of the money supply is commercial-bank deposits and liquid instruments, while less than 10% is cash and reserves. A retail digital euro, expected by 2029, would unlikely change this balance if stablecoins and tokenized deposits deliver fast, low-cost, programmable payments.
Stablecoins Market Growth
Stablecoins have grown significantly, with a total value exceeding $275 billion in mid-2025 and transaction volumes reaching $15 trillion in the first seven months of 2025. They underpin digital asset trading, cross-border remittances, and on-chain treasury operations. In emerging markets, dollar-denominated stablecoins function as a store of value and medium of exchange, extending the reach of the dollar through market innovation. Conservative estimates see stablecoins reaching around $500 billion by 2028, while more bullish forecasts envision a $4 trillion market by 2030, driven by institutional adoption and programmable finance.
Risks of Private Dollarization
If dollar-denominated stablecoins (USD-SCs) dominate while the euro area limits euro-denominated issuance and focuses solely on the digital euro, three structural risks arise. Large-scale use of USD-SCs in European payments could lead to private dollarization, weakening the euro’s domestic role and complicating monetary policy transmission. USD-SCs drive innovation in decentralized payment systems, and Europe risks ceding control over next-generation financial infrastructure to the US and Asia. If the digital euro is not widely adopted, the ECB could face a credibility gap, with USD-SCs already dominant by the time the digital euro launches. The domestic appetite for a digital euro remains weak, raising questions about its strategic value.
Regulatory Approaches
The US and EU share an emerging custodial model for stablecoins but diverge in regulatory philosophies. US regulators argue that systemically important stablecoins should operate within the perimeter of insured depository institutions or under equivalent prudential supervision. The EU’s 2023 Markets in Crypto-Assets Regulation (MiCA) establishes a two-track prudential framework, with non-bank issuers licensed as Electronic Money Institutions (EMIs) and banks issuing stablecoins under their banking licenses. The EU approach preserves the role of banks as central bank-backed financial intermediaries but may inhibit innovation due to technological inertia. The US model risks separating the lending function from the deposit function, potentially weakening the traditional credit channel.
Hybrid System and Prudential Parity
As markets mature, the line between stablecoins and deposits will blur, leading to prudential parity pressures. Some large issuers may seek greater flexibility to invest reserves, extend credit, or access central bank accounts directly. This could yield a new hybrid category: digital full-reserve or ‘narrow’ banks, bridging the custodial model and traditional intermediation. The EU could integrate digital money under a public monetary mandate, with a CBDC acting as the trusted settlement layer and smart contracts handling automated payments, routing, and compliance. Users could hold CBDC, stablecoins, and tokenized deposits in the same wallet, moving between them seamlessly. Stablecoins would provide global liquidity and 24/7 interoperability, while tokenized deposits would keep bank money usable inside programmable environments.
Two-Tier Structure and Migration Risks
This hybrid system would essentially be a two-tier structure. One type of entity would operate as a narrow bank, issuing fully backed, low-risk digital money and holding only safe assets such as reserves or government securities. Another set of entities would focus on credit intermediation, providing loans funded through capital markets or non-bank sources. This architecture would amount to a major structural reform with both advantages and costs. Migration of funds into narrow-bank stablecoins could shrink the banking system’s deposit base and weaken lending to businesses and other bank-dependent credit channels. In the EU, a more realistic path of partial accommodation could be taken, with regulators and the ECB imposing clearer segregation between payment liabilities and risky lending activities.
The EU could gain a strategic advantage by moving in this direction. Reserve-backed stablecoins would likely gain a strong advantage over tokenized deposits, stimulating payments innovation, enhancing the euro’s position in digital finance, and improving financial stability by replacing risky collateral pools with central-bank money backing. This could happen either by design or by necessity. Once private money becomes systemic, central banks ultimately underwrite it. The eurodollar market of the 1950s to 1970s escaped US regulation but became integral to global finance, leading to cooperation. Before 2008, shadow banks created money-like liabilities without a safety net, leading to central bank intervention during the crisis. Stablecoin evolution may follow the same logic, with central banks providing liquidity and oversight once stablecoins become systemic.
Implicaciones para la estructura financiera
La mayor tendencia hacia la tokenización y el pago digital podría permitir un nuevo tipo de estructura de dos niveles. Las bancas estrechas emitirían dinero digital plenamente respaldado y de bajo riesgo, y solo mantendrían activos seguros como reservas o valores del gobierno, mientras que otra serie de entidades proporcionarían préstamos financiados a través de mercados de capital o fuentes no bancarias. Esto sería una transformación significativa del sistema financiero, llevando el riesgo de desintermediación de los bancos. Aunque tendría que gestionarse cuidadosamente, podría llevar a una competencia que mejore la eficiencia. Un sistema así solo alcanzará la credibilidad completa con el apoyo del BCE. Sin acceso a las facilidades de reservas del BCE, ningún euro-stablecoin puede ser verdaderamente sin riesgo. Dado que las monedas estables compiten con depósitos en lugar de efectivo, el efecto en la señoría sería insignificante. Sin embargo, el banco central tendrá que asumir un papel más grande y estructural en la creación y intermediación de dinero. Esto ya ha ocurrido como resultado de nuevas regulaciones y transformación estructural desde la crisis financiera global. Cualquiera que sea la configuración del mercado financiero—pública, privada o híbrida—la verdad subyacente sigue siendo que cuando el dinero privado se vuelve sistémico, la credibilidad del banco central y la confianza pública aún proporcionan su colateral final. La arquitectura del dinero puede evolucionar, pero su fundamento no.
