The following is an opinion piece written by Eneko Knörr, CEO and Co-Founder of Stabolut.
The regulation concerning Markets in Crypto Assets (MiCA) introduced by the European Union aimed to provide clarity and security in the crypto realm. Ironically, however, its stringent approach towards euro-pegged stablecoins could unintentionally bolster the U.S. dollar’s prevailing role in international finance.
Stablecoins have become critical components of the global digital economy, facilitating quick, transparent, and borderless transactions. Presently, over 99% of stablecoins are linked to the U.S. dollar. Rather than challenging this dominance, MiCA regulation limits the opportunities for euro-backed stablecoins to gain a foothold.
While it might have drawn heavy criticism for stating outright, “we don’t want stablecoins because we’re focusing on our CBDC,” MiCA cleverly achieves a similar outcome by implementing stringent regulatory measures that render euro-stablecoins nearly impractical.
The impact is subtle yet evident—MiCA effectively hinders private innovation in euro-stablecoins while favoring the introduction of a central bank digital currency. This regulatory atmosphere inadvertently gives a significant edge to USD-backed stablecoins,reinforcing the U.S. dollar’s status as the primary currency for transactions worldwide. Despite discussions on the declining dominance of the dollar, stablecoins are driving a revival for the U.S. dollar, embedding it deeper in the global financial system.
Interestingly, this shift is occurring at a time when BRICS nations and even the EU are actively trying to challenge the U.S. dollar’s supremacy. Ironically, as global trade increasingly adopts blockchain technologies, the significance of stablecoins is rising rapidly.
Robust USD-backed stablecoins are set to play a crucial role in maintaining—or even increasing—the dollar’s share in the global market.
On the other hand, Europe’s aspiration to enhance the euro via a CBDC is fundamentally flawed. The belief that a euro CBDC can thrive and greatly elevate the euro’s role globally is not only mistaken but also overly simplistic.
While a CBDC may appear innovative on paper, historical evidence shows that government-led ventures often fall short when compared to the creativity, efficiency, and flexibility of private-sector initiatives. Moreover, CBDCs inherently raise issues regarding privacy, governmental interference, and the autonomy of consumers.
It’s genuinely disheartening to see Europe miss this vital understanding.
In contrast, the U.S. seems to grasp this situation clearly. By resisting the urge to introduce a federal CBDC and nurturing private stablecoins, American regulators are ensuring that innovation remains rapid, market-oriented, and globally competitive.
Europe’s miscalculation with MiCA is not just a lost economic chance; it’s a strategic blunder with significant geopolitical ramifications. By constraining euro-stablecoin development, Europe unwittingly fortifies USD dominance at a time when a viable, internationally acceptable euro-stablecoin could present meaningful competition and diversity.
Although policymakers might think they’re protecting the financial framework, they are, in truth, constructing a regulatory barrier that could lead to irrelevance. As global crypto adoption escalates, capital, talent, and ingenuity are flowing to areas that welcome experimentation. Europe’s overly cautious approach risks relegating it to the role of an observer in the upcoming era of financial infrastructure—watching from the sidelines as others define the rules.
If Europe genuinely cares about the euro’s global significance, it must reassess its strategy. The future of money is likely to be shaped by those who empower innovation rather than constraining it. Sadly, for Europe, MiCA could end up being the best gift for the U.S. dollar.