The president of Germany’s central bank is pushing Europe to double down on digital money — calling euro-pegged stablecoins and central bank digital currencies (CBDCs) strategic tools to protect the bloc’s payments independence and reduce reliance on the US dollar. In a speech at the American Chamber of Commerce’s New Year’s Reception in Frankfurt, Bundesbank chief Joachim Nagel argued that recent geoeconomic fragmentation has dented growth and competitiveness across the EU. Europe, he said, must take “decisive” steps to restore economic momentum by strengthening the euro’s international role and building payment systems that run on European infrastructure. Nagel reiterated the Eurosystem’s work on the digital euro, calling it “the first pan‑European retail digital payment solution, based solely on European infrastructures.” He framed the retail CBDC as a cornerstone of a sovereign, Europe-based payment stack that could serve consumers and businesses across the bloc. At the same time, Nagel voiced support for euro‑denominated stablecoins as a way to reduce costs and speed up cross‑border payments. In remarks last week to the Euro50 Group, he highlighted stablecoins’ potential for programmable transactions and more efficient cross‑border settlement — benefits that could help firms and individuals move money cheaper and faster. But Nagel also warned of risks. He flagged a potential threat if foreign‑currency stablecoins — particularly USD‑pegged tokens — become widely used in the euro area. That dynamic, he said, could amount to a form of “dollarization,” undermining the effectiveness of domestic monetary policy and weakening European sovereignty. The warning comes in the context of rapid growth in the stablecoin market and active U.S. policy moves. Nagel pointed to the GENIUS Act — signed into law last July — as part of a U.S. push to create clear legal frameworks for stablecoin issuers. The market has expanded sharply: global stablecoin market cap rose from about $205 billion at the start of the year to north of $300 billion by late 2025, with USD‑pegged tokens dominating and euro‑pegged tokens accounting for under 1% of the market. While Nagel judged the risk of wholesale replacement of the euro as small today, he said authorities should harness new technologies to reduce that likelihood. He advocated for a wholesale CBDC — a central bank digital money targeted at institutional actors — to enable programmable transactions in central bank money for financial markets. Complementary support for DLT‑based instruments not tied to central bank money, such as tokenized deposits and euro stablecoins, would also be useful. “These measures will allow us to utilise cutting‑edge digital technologies to maintain our monetary policy effectiveness in an uncertain geopolitical future. Additionally, they will increase our sovereignty,” Nagel concluded. Takeaway for crypto markets: Europe’s central bankers appear ready to shape a digital payments ecosystem that mixes a retail digital euro, institutional (wholesale) CBDC capabilities, and regulated euro‑pegged stablecoins — aiming to compete with a U.S.‑heavy stablecoin landscape while safeguarding monetary control and sovereignty. Read more AI-generated news on: undefined/news

#CBDC