A new policy brief from Brussels think tank Bruegel argues that the EU’s cautious approach to stablecoins risks backfiring. By discouraging the development of euro denominated stablecoins, European policymakers may be pushing demand toward dollar stablecoins. Once dollar instruments become entrenched as the default settlement asset in tokenized markets, network effects will lock in that dominance. Bruegel calls this “infrastructure dollarization.”
The paper, written for an informal meeting of EU finance ministers and central bank governors, makes a compelling case. If tokenized capital markets increasingly rely on dollar stablecoins for delivery versus payment, margining and collateral transfers, settlement activity could migrate away from Eurosystem infrastructure. The euro would remain the domestic monetary anchor, but its operational centrality in digital market infrastructure would diminish.
To counter this, Bruegel recommends accelerating the ECB’s Project Appia and wholesale CBDC to establish interoperability between DLT platforms and Eurosystem payment infrastructure. It calls for measures to support secondary market liquidity for euro stablecoins so they can compete with the deep dollar liquidity pools that dominate crypto markets. And it proposes several changes to MiCA, including removing the requirement for stablecoin issuers to hold 30 to 60 percent of reserves as bank deposits, allowing issuers to remunerate stablecoin holders directly (below the ECB policy rate), and granting EU regulated stablecoin issuers access to the ECB’s balance sheet including lender of last resort facilities.
The European Commission published a request for comment on MiCA adjustments this week, including some of the same points and making the timing of the Bruegel paper particularly relevant.
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