Digital euro eyed to counter Trump’s stablecoin push

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Last week, United States President Donald Trump signed an Executive Order outlining a digital currency strategy. The EO, titled “Strengthening American Leadership in Digital Financial Technology,” said the U.S. would promote lawful and legitimate dollar-backed stablecoins worldwide.

In response, European Central Bank (ECB) board member Piero Cipollone said eurozone banks need the digital euro. He outlined how Trump’s push for dollar-backed stablecoins would further disintermediate banks in Europe and elsewhere. Banks have expressed fears of losing deposits to central bank digital currencies (CBDCs) and stablecoins, with some warning of a collapse should it happen too quickly.

Cipollones’ comments prompted a wide variety of responses on social media. Some agreed with the idea, while others said the EU is making a mistake in trying to provide a centralized, government-controlled solution rather than letting the market provide Euro stablecoins products.

EU is missing the point again

USA is much smarter and see existing stablecoins (USDT, USDC) as extension of tradFi, where blockchain rails allow bigger spread of dollars world wide. They will regulate $ the same way as until now

EU doesn't need to provide CBDC like wallets…

— peter kris (@uPeterKris) January 26, 2025

President Trump’s stablecoin agenda

There are several interesting points regarding stablecoins in Thursday’s Executive Order.

First, it clearly references lawful and legitimate dollar-backed stablecoins. It’s unclear whether Tether, the biggest stablecoin issuer by market cap, will make the cut. Tether has a colorful history, including several run-ins with the U.S. law enforcement agencies. However, Cantor Fitzgerald (NASDAQ: CFYXX) Chairman and CEO Howard Lutnick is Trump’s pick for Commerce Secretary. His firm bought a 5% stake in Tether over the past year and oversees its reserves, so he may swing things in its favor.

Second, the EO establishes the President’s Working Group on Digital Asset Markets. It is tasked with putting together a federal regulatory framework for issuing and operating digital assets, including stablecoins. Finally, much-needed regulatory clarity is coming to the U.S.

Finally, Trump’s order poured cold water on CBDCs. Federal agencies are prohibited from establishing, issuing, or promoting CBDCs in the U.S.

More about the digital euro

In contrast to the Trump Administration’s approach of banning CBDCs and focusing on providing a framework for the free market to work within, the EU has already been laying the groundwork for a digital euro since 2020. The block sees it as a way to unify its fragmented payments system, facilitate efficient cross-border transactions, and make paying for goods and services in the eurozone easier.

After a two-year investigation phase ended in October 2023, the ECB launched the preparation phase in November. This second phase focuses on finalizing the rulebook and selecting providers to build the necessary infrastructure.

As of January 2025, the ECB is testing the digital euro’s infrastructure. With trials to finish in May, the world will soon know whether the digital euro is to become a reality. In any case, the Trump Administration’s moves regarding USD-backed stablecoins make it much more likely.

Interesting insight: In 2000, at the turn of the new millennium, the U.S. dollar accounted for 70% of global currency reserves, whereas the euro accounted for 18%. Today, the U.S. dollar accounts for 60%, and the euro accounts for 20%. With the rivalry between these two giants heating up, there will be many implications for payment technology and digital currencies in the coming years.

Watch: Finding ways to use CBDC outside of digital currencies