European Central Bank eyes digital Euro to counter Trump’s stablecoin push

In response to US President Donald Trump’s recent executive order promoting dollar-backed stablecoins, the European Central Bank is emphasizing the need for a digital euro to maintain the competitiveness of eurozone banks.

ECB Board Member Piero Cipollone expressed concerns For Reuters that the American initiative could attract customers of European banks, underlining the urgency for the ECB to develop its own digital currency.

President Trump executive order aims to “promote the development and growth of legal and legitimate stablecoins worldwide,” positioning The United States as a leader in the cryptocurrency sector.

This move is seen as a potential threat to European banks, as stablecoins – Cryptocurrencies typically armed with the US dollar – could attract customers looking for alternatives to traditional banking services.

Stablecoins operate similarly to money market funds by providing exposure to short-term interest rates in official currencies, primarily the US dollar.

In contrast, a digital euro would serve as an online wallet guaranteed by the ECB but operated by entities such as banks. This system would allow individuals, including those without bank accounts, to make payments, with assets probably capped at a few thousand euros and not to accumulate interest.

Digital Euro as a threat to banks

However, European banks have expressed concern that a digital euro could lead customers to move funds into ECB-backed wallets, potentially reducing bank deposits.

The ECB is currently exploring the practical implementation of a digital euro, with a final decision awaiting legislative approval from European lawmakers, according to Reuters.

President Trump’s executive order also prohibits the Federal Reserve from issuing its own Central bank digital currenciesfurther distinguishing the American approach from potential European strategies.

As the ECB deliberates on the introduction of a digital euro, the global landscape of digital currencies continues to evolve. Countries like Nigeria and China have already launched their own digital currencies or are running pilot programs, reflecting a broader trend toward adoption of central bank digital currencies around the world.