Crossing paths: How the US and Europe Are Approaching the Stablecoin Frontier

As the global digital asset ecosystem matures, stablecoins are fast becoming a cornerstone of modern finance -  reshaping financial infrastructure, policy and monetary dynamics. And yet, two of the world’s most powerful economic blocs - the US and Europe -  are pursuing noticeably different approaches towards their integration. 

These divergent paths not only reflect differing philosophies in regards to stablecoin’s place within each block’s respective jurisdictions but also shed light on deeper strategic priorities. 

Dollar Dominance and Structural Trade-Offs

In the United States, stablecoins have, argubly overnight, become conduits for monetary expansion. Treasury Secretary Scott Bessent’s projection of a $3.7 trillion stablecoin gives weight to this trajectory. 

Dollar-pegged stablecoins like USDT and USDC are now widely used across emerging markets as digital substitutes. Each token backed by dollar-denominated assets - in this case, primarily US Treasuries - enhances global demand for American Debt while solidifying the dollar’s status as the preferred digital unit of account. 

It’s not difficult to understand why the US has been particularly bullish on stablecoins as of late. 

The current state of affairs with stablecoins in the US has essentially created a powerful network effect DeFi protocols, NFT platforms and exchanges all defaulting to USD-backed tokens. It is not a coincidence that the GENIUS Act is steadfastly making its way through the halls of Congress. This provides greater regulatory clarity behind stablecoins which further reinforces its benefits. Moreover, the absence of any central bank digital currency (CBDCs) eliminates any issues over federal competition in the stablecoin space. 

But there are still roadblocks that the US will need to circumvent. Noticeably, the expanding demand for digital dollars places pressure on the US to maintain large trade deficits. This creates a potential conundrum: as the dollar becomes the dominant global liquidity source, the US must export dollars at the expense of domestic industrial balance. Critics warn that such a strategy could undermine any serious attempt for Trump’s administration to revive American manufacturing competitiveness, potentially locking the country into a type of financial dominance that comes at the cost of productive capacity. 

Institutional Oversight Dominates Europe

In contrast, Europe has taken a different route, prioritising regulation and institutional control. With the adoption of the Markets in Crypto-Assets (MiCA) regulation in late 2024, the EU became the first major jurisdiction to implement a comprehensive legal framework for not only stablecoins but other crypto assets. 

With an established legal structure, we are not witnessing initiatives like EURAU, a euro-pegged stablecoin launched by AllUnity - a joint venture between Deutsche Bank, DWS and Galaxy Digital. Licensed by BAFin as an E-Money Institution, EURAU is designed to offer institutional-grade transparency and compliance, integrating directly into enterprise treasuries and fintech platforms. 

However, despite Europe’s headstart on providing regulatory clarity on digital assets, euro-denominated stablecoins remain somewhat on the periphery. Currently, they account for less than 1% of global stablecoin volume. A large reason for the slower uptake is simply down to persistent structural challenges. 

The Eurozone still lacks a unified fiscal authority and stablecoin issuers must navigate a patchwork of sovereign bonds across different member states. Moreover, tensions persist between the European Central Bank - which favours a public digital euro, shunning private initiatives - and the European Commission, which is more open to privately-issued stablecoin initiatives.

Two Models, One Future?

While the US embraces a market-led approach that amplifies the dollar’s global reach, Europe is focused on regulatory control and institutional safeguards within  a fragmented economic ecosystem. 

The long-term outcome of these two strategies will determine who leads in the next era of digital finance and , on a macro level, shape how power, trust and opportunity are distributed and balanced in a rapidly shifting global monetary system.