European banks to launch euro stablecoin in bid to counter US dominance
FILE PHOTO: FILE PHOTO: UniCredit bank logo is pictured in Rome, Italy, November 25, 2024. REUTERS/Yara Nardi/File Photo
FRANKFURT :A consortium of nine European banks, including heavyweights ING and UniCredit, said on Thursday they are forming a new company to launch a euro-denominated stablecoin, a move they hope will help counter U.S. digital market dominance.
A host of top U.S. financial firms have been preparing to launch their own dollar-backed crypto tokens after President Donald Trump signed a law overseeing rules for stablecoins that could further cement U.S. hegemony.
The use of stablecoins - designed to maintain a constant value and backed by traditional currencies - has exploded in recent years, notably among crypto traders moving funds to and from more volatile tokens. But they are also used in mainstream digital payments and cross-border transactions.
The European banks' new Amsterdam-based company is expected to launch its stablecoin in the second half of next year.
US STABLECOIN DOMINANCE, ECB REMAINS SCEPTICAL
While global stablecoin issuance stands at nearly $300 billion, euro-denominated stablecoins totalled just $620 million, according to figures released last week by the Bank of Italy, with dollar-pegged tokens overwhelmingly dominant.
"The initiative will provide a real European alternative to the U.S.-dominated stablecoin market, contributing to Europe's strategic autonomy in payments," the banks said.
They launched the effort, which they said will create a token that can be used for quick, low-cost payments and settlements, even as the European Central Bank voices scepticism over stablecoins.
ECB President Christine Lagarde in June told European policymakers that privately issued stablecoins posed risks for monetary policy and financial stability. As a safer alternative, she has urged European lawmakers to introduce legislation backing the launch of a digital version of the EU's single currency.
Some commercial banks, however, have pushed back against the introduction of a digital euro, fearing that it would empty their coffers as customers transfer cash out of banks and into the safety of an ECB-guaranteed wallet.
EUROPE UNDER PRESSURE, RISK OF BEING LEFT BEHIND
In addition to ING and UniCredit, the other banks participating in the new company include Banca Sella, KBC, DekaBank, Danske Bank, SEB, Caixabank and Raiffeisen Bank International.
They said that others could join the initiative, and a CEO for the company would be appointed soon.
A recent report by Deutsche Bank highlighted that emerging market economies, in particular, are adopting dollar-based stablecoins to replace local deposits and cash.
"This has created a global monetary dilemma: countries should adopt stablecoins or risk being left behind. Europe is under particular pressure," the report said.
Societe Generale's crypto arm, SG-FORGE, launched a euro-based stablecoin in 2023, although it has not been widely adopted, with just 56.2 million euros ($66 million) in circulation, according to its website. The French bank also launched a U.S.-dollar stablecoin earlier this year, with circulation of just $32.25 million.
Bank of America and Citigroup are among the U.S. banks that have been considering issuing their own stablecoins. Few banks, however, have actually launched one, and the industry remains dominated by non-bank players such as Tether and Circle.
($1 = 0.8513 euros)
