Euro Stablecoins: Can They Break USD's Grip in Europe?

Stablecoin adoption is rapidly increasing in Europe, closely mirroring trends in the United States. However, the growth isn't quite what European leaders hoped for. Currently, USD-backed stablecoins are the preferred choice over Euro-backed options.

This dominance poses a threat to Europe's monetary sovereignty. Alexander Hoeptner, CEO of AllUnity, a German Euro-backed stablecoin issuer, emphasized in a BeInCrypto interview that increasing the demand for Euro-backed stablecoins is crucial to maintaining the Euro's relevance in the digital finance landscape.

Europe's Stablecoin Dilemma

Stablecoin usage is accelerating across the European Union, but the preference for USD-backed options is a concern.

Data from Crypto Rank indicates that North American stablecoin transactions increased by nearly 42% from 2024 to 2025. The EU's share, while significant, stood at 34%, a substantial rise from 16% the previous year.

Despite this growth, 99.8% of the total stablecoin supply remains USD-based. This widespread use of USD-backed stablecoins is worrying European leaders who aim to preserve the strength of their fiat currency.

MiCA's Impact on Stablecoin Preferences

The United States dollar's global economic dominance has made it a default asset, intensifying competition with currencies like the Euro.

Before the implementation of the Markets in Crypto-Assets (MiCA) regulatory framework, European users had little incentive to adopt Euro-backed stablecoins. The stability and liquidity of USD-backed stablecoins, backed by the dollar’s established role, made them more attractive.

Relying on USD-backed stablecoins also means depending on the US regulatory system, potentially undermining the Euro's international standing and increasing vulnerability to American policymaking.

“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,” Hoeptner told BeInCrypto.

With MiCA in effect, there's now a stronger incentive for European users to transition to Euro-backed stablecoins, as the region establishes a more structured and regulated alternative to USD-backed assets.

The Promise of Euro-Backed Stablecoins

Euro-backed stablecoins offer a vital alternative for European users to conduct digital transactions without defaulting to USD.

They also serve as a crucial bridge currency for cross-border trade, enabling businesses and individuals to streamline international transactions and reduce exposure to foreign currency risks.

“This would not expose the European users to regulatory uncertainty and secure also the digital identity within Europe which is necessary for coin usage,” Hoeptner added.

Despite MiCA's efforts to standardize regulations, the European Union still faces challenges in establishing a unified approach to managing its currency due to the lack of a central financial authority.

“The biggest challenge is that although we have a unified regulatory framework with MiCAR, we don’t essentially have a unified European monetary policy comparable with the US when it comes to pushing for widespread adoption of stablecoins,” Hoeptner said.

However, growing crypto adoption often leads to resistance from traditional financial institutions who feel threatened by the shift.

Traditional Players: Resistance or Opportunity?

Established financial institutions are often cautious about adopting new technologies, especially after decades of refining traditional financial infrastructure.

Integrating Euro-backed stablecoins represents a shift from legacy banking practices. The lack of understanding or the fear of losing control may lead financial institutions to resist this change.

According to Hoeptner, the greatest risk for these institutions is inaction.

“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,” he said.

A Euro-backed stablecoin could complement the digital Euro, the government-backed digital version of the EU’s currency.

The official digital Euro would ensure security, stability, and regulatory oversight, while private stablecoins would offer greater flexibility, programmability, and access to innovative features such as smart contracts and decentralized finance.

In this context, these two forms of digital currency would play complementary roles in Europe’s digital economy, providing a broader range of options for users and businesses.

Reducing Reliance and Enhancing Influence

While USD-backed stablecoins currently dominate Europe, the implementation of MiCA regulation paves the way for Euro-backed stablecoins to gain prominence. As adoption increases, these stablecoins can reduce Europe’s reliance on the US dollar and act as a bridge currency.

Integrating Euro-backed stablecoins alongside the digital Euro can bolster Europe’s financial sovereignty, enhance its competitiveness, and decrease dependence on external currencies.