Bundesbank President Joachim Nagel proposes euro-denominated stablecoins as a crucial tool to enhance the international standing of the euro and mitigate the risk of dollarization. Speaking at the American Chamber of Commerce in Germany, Nagel emphasized that such stablecoins could facilitate low-cost cross-border payments for individuals and businesses.
Nagel warned that a widespread adoption of USD-pegged stablecoins could lead to a de facto dollarization of the Eurozone, potentially undermining the effectiveness of domestic monetary policy and European sovereignty. To counter this, he highlighted the European Central Bank's (ECB) exploration of technological opportunities, including a wholesale central bank digital currency (CBDC) and the use of distributed ledgers for tokenized deposits and euro-pegged stablecoins.
The ECB is targeting a digital euro launch by 2029, with ongoing work on a wholesale CBDC. While some experts suggest tokenized deposits might offer a superior alternative to stablecoins for preventing dollarization, Nagel argues that both wholesale CBDCs and euro-pegged stablecoins would enable the Eurosystem to leverage advanced digital technologies to maintain monetary policy effectiveness.
Despite these initiatives, some commentators express concerns about stablecoins, citing potential downsides such as facilitating illicit transactions and undermining the control of national central banks over their money supply, particularly in developing economies. However, for Europe, confidence in the euro and the ECB is seen as a strong defense against significant dollarization.