Key Highlights
- Bundesbank president, Joachim Nagel, has announced his support for euro-backed stablecoins and a digital euro to avoid “digital dollarisation.”
- His statement comes when the stablecoin market is currently dominated by USD-pegged stablecoins, with over 90%
- Amid the tariff war, this statement has sparked discussion in the community
On February 16, the Deutsche Bundesbank president, Joachim Nagel, suggested the development of euro-denominated stablecoins along with a Central Bank Digital Currency (CBDC) by saying that this development is important for Europe’s economy.
In the latest speech, the German central bank chief shared the financial bank’s vision where new digital payment methods can help the country to reduce the dominance of US-based systems and make cross-border payments cheap for everyone.
Nagel Suggests Stablecoins as Tool for Low-Cost Payments
While speaking at the American Chamber of Commerce in Frankfurt, Nagel stated that privately launched euro-based stablecoins can play a very important role along with official central bank currency.
“Notably, a wholesale CBDC would allow financial institutions to make programmable payments in central bank money. I also see merit in euro-denominated stablecoins, as they can be used for cross-border payments by individuals and firms at low cost,” said Nagel.
However, Nagel also raised a warning during his speech. He stated that over 99% of the global stablecoin market is currently pegged to the USD. He said that if USD-based stablecoins become the standard in Europe, it could create a situation of “digital dollarisation.”
In the past, he affirmed that this situation “could severely impair” the European Central Bank’s ability to create monetary policy. He also stated that it would ultimately “weaken European sovereignty.”
After the approval of the GENIUS Act, it became the first federal law in the U.S., and the stablecoin market has witnessed explosive growth. At the time of writing, the cumulative market capitalization is around $307 billion, according to DefiLIama.
Nagel Talks about Digital Euro for Independence
In his speech, Nagel mentioned the importance of the ECB’s digital euro project. He has proposed the retail CBDC as “ the first pan-European retail digital payment solution, based solely on European infrastructures.”
“We have already accomplished important exploratory work on the possible introduction of a wholesale CBDC. Notably, a wholesale CBDC would allow financial institutions to make programmable payments in central bank money. I also see merit in euro-denominated stablecoins, as they can be used for cross-border payments by individuals and firms at low cost,” he said.
Also Read: Michael Saylor: If the World Order Is Falling, Own Bitcoin