Dollar-backed stablecoins are no longer just a crypto market tool. Europe now sees them as a new channel for American monetary power.
The European Central Bank is putting a sharper name on a risk that has been building in plain sight: if the next generation of digital payments runs on stablecoins, it may also run on dollars. That is not a small detail for Europe. It means the fight over stablecoin regulation is becoming a fight over who controls the rails of money itself.
Isabel Schnabel, a member of the ECB Executive Board, told a Bank of Korea conference in Seoul on June 1 that rising stablecoin use could reinforce the dollar's global role, weaken some countries' control over monetary policy and reduce the euro's reach. According to Reuters, her argument was not that stablecoins make the dollar stronger because the US economy is suddenly stronger. The concern is more practical: network effects, scale and first-mover advantage can do the work that old-fashioned diplomacy used to do.
That matters because stablecoins are moving beyond the crypto trading venues where they first became popular. The largest tokens are still mainly used as dollar substitutes inside digital asset markets, but payment companies, fintech apps and banks are beginning to treat them as settlement infrastructure. Once that happens, the currency inside the token matters as much as the technology around it.
The ECB's own speech material makes the market structure hard to ignore. Global stablecoin market capitalisation is now close to $300 billion, and the two largest dollar stablecoins, Tether's USDT and Circle's USDC, account for roughly 90% of the total market. Euro-denominated stablecoins remain tiny by comparison, with a combined market value of about EUR 500 million.
This is where the argument becomes more interesting than the usual crypto debate. Stablecoins are often presented as an alternative to banks, central banks and traditional payment systems. Yet most of the successful ones are not an escape from fiat money at all. They are private wrappers around the dollar. If they become a common tool for cross-border payments, savings or business settlement, they may export dollar use into places where people did not set out to make a geopolitical choice.
For emerging markets, that can look attractive. A dollar token on a phone may be easier to access than a dollar bank account, especially in countries dealing with inflation, capital controls or weak local banking systems. For central banks, it creates a familiar problem in a faster form. Once households and firms begin to price, save and transact in another currency, local monetary policy becomes harder to transmit.
Regulation is becoming part of the product
The United States has moved from debate toward a clearer legal pathway faster than many expected. The GENIUS Act, signed into law on July 18, 2025, created a federal framework for payment stablecoins, although major implementation rules are still being written. The broader CLARITY Act remains part of the market-structure fight moving through Congress.
That clarity is already changing business behavior. SoFi said on May 27 that SoFiUSD, its bank-issued dollar stablecoin, is available to members inside the SoFi app and runs on Ethereum and Solana. The company says the token is redeemable one-for-one for dollars through SoFi Bank and backed by liquid assets. Cash App has also begun rolling out USDC support across Solana, Ethereum, Polygon and Arbitrum, pushing stablecoins closer to mainstream payment habits rather than leaving them inside specialist crypto wallets.
Europe is not standing still. Its Markets in Crypto-Assets Regulation, known as MiCA, is already one of the most developed crypto frameworks in the world. Schnabel's speech noted that MiCA requires at least 30% of stablecoin reserves to be held as bank deposits, rising to 60% for significant stablecoins. That is meant to reduce run risk and keep issuers tied to the regulated financial system.
But regulation can have two effects at once. It can make a market safer, and it can also reveal where the market has failed to grow. MiCA gives Europe a framework, but it does not automatically create euro stablecoin demand. Users choose the token with the most liquidity, the broadest acceptance and the easiest path into other services. Right now, that is usually a dollar token.
The euro needs more than rules
The practical question for Europe is whether it wants to rely mainly on the digital euro, encourage private euro-denominated stablecoins, or use both. A central bank digital currency may serve public policy goals, but private stablecoins move quickly where developers, fintechs and exchanges see commercial opportunity. Waiting too long risks leaving the euro with strong rules and weak market share.
For businesses, the lesson is straightforward. Stablecoins are becoming part of the payment stack, not just the crypto stack. If dollar tokens become the default settlement layer for global fintech, the winners will not only be token issuers. US banks, Treasury markets and dollar-based platforms could all benefit from a new source of international demand.
The next phase will be less about whether stablecoins survive and more about whose money they carry. Schnabel's warning shows that central banks understand the stakes. The dollar's digital lead is no longer a side effect of crypto adoption. It is becoming a policy problem for everyone else.
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