TBW - Stablecoins are a revolution, and Europe can't miss the moment
The stablecoin market has reached a tipping point. What began as a crypto experiment now processes over $15.6 trillion annually, matching Visa's entire global network volume. This digital infrastructure operates around the clock, yet 95% of stablecoin volume runs on US dollars whilst Europe's currency, the euro, remains a minor player.
The rise of stablecoins represents a significant development in global monetary policy. Far from challenging American financial dominance, these digital assets are becoming instruments that extend and strengthen US dollar hegemony into the cryptocurrency ecosystem.
The Dollar's Digital Network Effect
Stablecoins create a reinforcing cycle for dollar dominance. Every time a new USDC or Tether token is minted, it requires dollar-denominated backing, creating immediate demand for US currency and Treasury securities. With over $150 billion in stablecoin market capitalisation, this represents substantial dollar demand.
The global reach amplifies this effect. A trader in Nigeria, an entrepreneur in Vietnam, or a family in Argentina can now access dollar-denominated digital assets instantly, 24/7, without traditional banking systems. This digital dollarisation extends American monetary influence to populations that might never have directly interacted with the US financial system.
Stablecoins are cementing the dollar's role as the dominant unit of account in cryptocurrency markets. As DeFi protocols, NFT marketplaces, and crypto trading platforms standardise around USD-pegged stablecoins, they create network effects that make alternative currencies increasingly less relevant in the digital economy.
Beyond Crypto Trading
The assumption that stablecoins serve "mostly crypto traders" reflects outdated analysis. In countries facing significant inflation, USD stablecoins offer preservation of savings. Across the Global South, stablecoins provide efficient cross-border fund transfers, bypassing costly and slow remittance networks. In developed markets, they're becoming preferred rails for instant, low-cost payments.
Major corporations have embraced this infrastructure. Stripe recently launched stablecoin capabilities and acquired Bridge for $1.1 billion—its largest acquisition ever. Mastercard and Visa have launched stablecoin settlement capabilities. Companies like Uber and Amazon are exploring stablecoin integration. These represent strategic infrastructure decisions rather than crypto experiments.
Europe's Structural Challenges
Europe faces three interconnected problems. First, there's no clear vision for the relationship between CBDC initiatives, digital euro development, and stablecoins. Second, MiCA creates structural disadvantages. The reserve composition rules—60% in segregated accounts at banks, 40% in liquid instruments—create permanent revenue disadvantages. While Circle maintains approximately 10% in cash earning 1-2% and 90% in instruments managed by BlackRock earning 5%+, European issuers must hold 60% in low-yielding bank deposits. On a €1 billion stablecoin, this 3-4% yield difference means €30-40 million less annual revenue.
Third, European use cases and business models need differentiation from US approaches. Attempting to replicate Tether or Circle's model in Europe faces structural disadvantage. The reserve arbitrage window that enabled their success has closed. European firms cannot compete on reserve yields when starting with a 3-4% structural disadvantage.
The Retail Distribution Solution
The solution requires abandoning the reserve-yield model entirely. Instead of competing with Tether on its terms, European stablecoins need business models suited to European conditions. The traditional stablecoin value proposition—instant settlement and protection against currency volatility—provides limited appeal in Europe. SEPA already processes transfers in seconds across 36 countries, and the euro remains stable.
This absence of organic demand indicates the opportunity. Without urgent payment or currency problems to solve, euro stablecoins must offer different value propositions. One promising path comes through major retailers, who already manage payments, customer relationships, and trust at scale. Another involves foreign exchange services—as the US dollar's relative position shifts, the appeal of holding funds in euro-denominated stablecoins may increase for international users.
Consider how Amazon could deploy a branded euro stablecoin, offering customers 5% discounts, free Prime membership, or enhanced delivery options. The experience remains seamless: no wallet setup, no gas fees, no blockchain terminology. Amazon manages smart contracts and covers transaction costs behind the scenes.
This retail-led approach solves adoption barriers that pure fintech solutions cannot address. Users never encounter crypto exchange interfaces, KYC procedures with unfamiliar companies, or concerns about private keys. They simply choose a payment option at checkout.
The Infrastructure Opportunity
Stablecoins will continue expanding across use cases. AI agents using stablecoins for micro transactions represent one emerging application. Companies like Catena, founded in 2019 by Sean Neville, are implementing such systems today.
Europe can establish a position in digital finance infrastructure through strategic deployment of euro stablecoins. This requires recognising that traditional financial institutions may not drive payment innovation independently. Success requires integration into existing user behaviours through retail partnerships, gaming platforms, or B2B marketplaces.
The infrastructure being built now will determine Europe's role in digital finance for the next decade. European firms that identify and exploit specific use cases can establish positions in programmable money that provide lasting competitive advantages. Those waiting for perfect conditions will find themselves dependent on whatever systems others create.
The stablecoin market represents established infrastructure rather than speculative technology. The question is whether Europe will participate as a leader or remain dependent on US-controlled financial rails. The decisions made now will determine Europe's financial sovereignty in an increasingly digital economy.
