Key Takeaways
- The dollar has recently performed at a near four-year low, marking the worst first half of the year for the currency in over 50 years.
- However, the USD’s dominance is now being tested.
- This is driving central banks toward safe-haven assets.
President Trump’s acts of unpredictability during his second term have reverberated both domestically and worldwide. Especially shaky with impact is the U.S. dollar, and its status as a choice reserve currency.
For stablecoins, this means only one thing: a golden opportunity for competition. And now is Europe’s time to populate the market.
Visit Our Stablecoin Partners
De-Dollarization
U.S. dollar-backed stablecoins have always held a strong monopoly on the market, with 56 USD-pegged coins ranking in the market-cap league table and the two largest stablecoins – Tether and Circle – pegged to the dollar.
Conversely, only 12 prominent euro-pegged coins have earned their place on the leaderboard, and the most popular of them, the EURC, currently features at a meagre number 18.
Facing the prospect of a potential recession, inflationary tariffs, and, worst still, now that the “big, beautiful bill” has come to pass, a ballooning budget deficit, the USD has taken a near knockout blow.
Globally, the dollar’s structural attractiveness is being called into question, and according to JPMorgan, de-dollarization is already unfolding in central bank FX reserves.
This is driving central banks toward safe-haven assets, such as the ever-reliable gold, the renminbi, and the euro. Clearly, the dollar is losing its clout.
President Trump’s Policies
Trump’s questionable policies have significantly dented confidence in the U.S. economy, to say the least. And from my perspective, Europe will be the first in line to reap the benefits.
Already, private sector portfolios are pivoting toward Europe at a significant pace, and we’re also seeing a rebalancing of global investors toward the euro. It seems everyone has understood Christine Lagarde’s “global euro” memo.
Across the Atlantic, the euro has risen nearly 14% against the greenback. Whether this meteoric rise is due to substantial capital flow into the continent, increased government spending, or the EU’s large trade surplus, Europe has capitalized on the USD’s demise. In fact, it’s currently nudging $1.20 – a level only last met four years ago.
When I think about where the euro was a decade ago, performing at a 12-year low against the dollar, I can’t help but feel the shoe is now firmly on the other foot.
And better still, the ECB has vowed to further bolster the currency, seeing its rising popularity as a reflection of the strength of the bloc’s economy. Frankly, the ECB is beyond playing second fiddle to the dollar in the international monetary system.
MiCA
But it’s not just this recent shift in attitude that could usher in a new dawn for EUR-pegged stablecoins. The bloc’s renewed regulatory approach to digital assets is equally as important.
And it’s the bloc’s flagship framework for DeFi—MiCA—that will supercharge stablecoin development across the continent.
MiCA, which was fully enforced earlier this year, provides clear regulatory guidelines for crypto issuers and exchanges in Europe. Eager to set progress in motion, the EU has already approved ten issuers, with the likes of Circle, Crypto.com, and OKX all already securing licenses.
The floodgates are open, driving competition as issuers jockey for a position in a welcoming, pro-innovation European market.
That’s not to say MiCA has been smooth sailing. Stablecoin giant Tether hasn’t secured an EU license, disagreeing with the requirement to keep at least 60% of its reserves in European banks.
Of course, EU regulators are already discussing “MiCA 2.0” to address any gaps in the legislation, but if anything, I see Tether’s absence as an opportunity. It will only encourage more issuers to muscle into the market and will only benefit competition.
Don’t get me wrong, the dollar is still king in FX, and Tether still dominates 70% of the stablecoin market, completely displacing either is unrealistic.
But the euro is strengthening, and Europe is capitalizing on the fallout of Trump’s reckless and economically destructive sequel in the White House.
With the dollar’s declining status, I see a perfect storm for the euro to make gains and crypto issuers to roll out more euro-pegged stablecoins, perhaps to the point where they seriously challenge their USD counterparts.
When it comes to the stablecoin market, Europe may not be willing to settle for anything but gold.
Visit Our Stablecoin Partners
The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.
About the Author
Fiorenzo Manganiello is the co-founder and managing partner of investment firm LIAN Group. At LIAN Group, he has built and funded many successful technology companies across cryptocurrency, blockchain, digital infrastructure and healthcare. Outside of the day-to-day of LIAN Group, Manganiello is an enthusiastic art collector and is particularly interested in contemporary and digital art. He is also a professor of blockchain technologies at Geneva Business School.
