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A GENIUS Response? EU Digital Money: Rules, Euro Stablecoins and CBDCs

Donald Trump’s push to promote a favourable regulatory framework for US-denominated stablecoins – beginning with the January 2025 Executive Order Strengthening American Leadership in Digital Financial Technology – clearly signalled the new administration’s ambition for the US to lead in digital finance. The subsequent GENIUS Act is paving the way for the consolidation and global expansion of US-denominated stablecoins and the White House used the signing of the act to explicitly argue for the continuing dominance of the US Dollar as the world reserve currency.[1]

This shifting dynamic has raised concerns among EU policymakers that US-dollar denominated stablecoins could scale within the EU market and compete with the euro-denominated payment instruments. Reflecting this, tensions have emerged between the European Commission and the European Central Bank (ECB) regarding whether the EU has an adequate framework to mitigate the risks posed by the growing diffusion of dollar-based stablecoins and the potential for the increased ‘dollarisation’ of the EU economy.

Background: Stablecoins, tokenisation and CBDC

Stablecoins are digital tokens whose value is anchored to other assets. They represent the most developed form of digital (on-chain) fiat money and are a priority for policymakers because they connect the traditional financial system with on-chain finance. While they replicate many of the functions of traditional monetary instruments – such as cash or commercial bank deposits – they are issued by private entities that backs the tokens 1:1 with cash and cash-like instruments.

Regulators worldwide have begun establishing frameworks for stablecoins, focusing primarily on governing their issuance and, through this, attempting to control their interaction with traditional money, credit creation and overall financial stability. Today, around 98 per cent of stablecoins in circulation are denominated in US dollars, now regulated under the GENIUS Act.[2] In 2023, the European Commission approved the implementation of the Markets in Crypto-Assets (MiCA) regulation, designed to protect European consumers from potential risks associated with crypto-assets, including stablecoins.

Other forms of tokenised money – such as tokenised (commercial) bank deposits – are digital representations of claims on real-world monetary value, including bank deposits, central bank liabilities or other regulated funds. They preserve the legal and economic characteristics of the underlying money while enabling programmable, traceable and near-instant settlement through token-based transactions. Central Bank Digital Currency (CBDC), by contrast, is a digital form of sovereign currency issued and backed directly by a central bank and functioning as legal tender. In the Eurozone, the ECB is working to develop a CBDC known as the Digital Euro.[3]

Regulatory dimensions: MiCA and GENIUS

The European Systemic Risk Board (ESRB) recently warned that stablecoins could pose a risk to financial stability and monetary sovereignty in the EU.[4] The GENIUS Act is designed to ensure the US Dollar global dominance by supporting the issuance and growth of US-dollar-backed stablecoins.[5] The MiCA Regulation, which came into force in July 2024, provides the EU’s regulatory framework for stablecoins. It classifies stablecoins (a term it does not use) into two categories – E-Money Tokens (EMTs) and Asset-Referenced Tokens (ARTs) – based on the backing mechanism of the token. In practice, all stablecoins issued in the EU to date under the EMT and are backed 1:1 by a single underlying fiat currency. There are currently 17 EU authorised EMT issuers, offering 25 EMTs that reference the Euro, the US Dollar, the Czech Krona and the British Pound.[6]

MiCA allows for foreign-issued stablecoins to be used in the EU up to a daily limit of 1 million transactions or 200 million euros in value. These limits are designed to reduce the risk of the dollarisation – both in everyday payment activity or in large-scale (wholesale) market transactions via dollar-backed stablecoins. Nonetheless, the ECB has recently expressed concerns that stablecoins issued simultaneously inside and outside the EU (so called ‘multi-issuance’) could still pose financial stability risks. In the event of a ‘run’ on such a stablecoin, EU bank deposits might ‘flight’ to redeem the non-EU portion of the token.[7] The European Commission and European Banking Authority, however, maintain that MiCA’s safeguards are adequate to mitigate this risk.[8] Thus, while the EU regulatory framework is designed – among other objectives – to protect the EU from increased Dollar dominance liked to US-dollar stablecoins, its effectiveness remains contested. As a result, the EU is also pursuing complementary strategies, including supporting European private sector initiatives and developing a public sector Digital Euro.

EU private sector initiatives

In the EU domestic market, industry players are not standing still. Momentum is building around tokenisation initiatives and efforts to promote euro-denominated stablecoins, reflecting a growing recognition that Europe risks falling behind in the digital-money race. While the US dollar accounts for roughly 60 per cent of global reserves – compared with about 20 per cent for the Euro – the imbalance in the stablecoin market is closer to 99 to 1.[9] This disparity is not accidental: US policymakers have incentivised private innovation to reinforce the international reach of the Dollar, while Europe has taken a more cautious approach. Against this backdrop, while stablecoins pose a challenge to EU financial institutions, they also represent a significant commercial and strategic opportunity.

Although retail demand in Europe remains modest, the strategic importance of euro-denominated stablecoins is becoming increasingly clear in wholesale markets. Here stablecoins could serve as the cash leg for tokenised assets – particularly where corporates want to settle both the asset and the payment on the same technology stack – and as an alternative mechanism for cross-currency transactions beyond the Single Euro Payments Area (SEPA). For European financial institutions, euro-denominated stablecoins are thus taking on industrial and strategic importance, helping to ensure that the economic value generated by digital settlement systems remains in Europe.

Reflecting this momentum, concrete initiatives are already taking shape. Circle, one of the largest global issuers and a US-based company, has launched a euro-denominated stablecoin. Meanwhile, ten major EU financial institutions (ING, Banca Sella, KBC, Danske Bank, DekaBank, UniCredit, SEB, CaixaBank and Raiffeisen Bank International) have formed a joint venture to develop Qivalis, a MiCA-compliant euro-stablecoin. BBVA and Bancomat have also announced plans to issue their own solutions in 2026. A key risk in this rapidly evolving market, however, is fragmentation, which could undermine the objective of building a unified, truly pan-European payments ecosystem. Similarly, although MiCA provides a single regulatory framework across the EU, further work is needed to reduce fragmentation in capital markets and support start-ups and new market entrants.

ECB and CBDCs: The public infrastructure response

The acceleration of – and increased political attention to – the ECB’s work on CBDCs should also be interpreted in light of these structural changes in the digital money landscape. The ECB is developing the Digital Euro, a retail CBDC intended to be accessible to the general public, including both households and corporate users. The ECB increasingly argues that the Digital Euro would alleviate Europe’s strategic dependence on foreign card-payment networks such as Mastercard and Visa, on Big Tech payment applications and – potentially in the future – on US-denominated stablecoins operating within the EU’s jurisdiction. While it is not immediately clear why a European consumer would choose to pay in a US-dollar stablecoin, one plausible scenario is that stablecoins could become integrated into the ecosystems of large technology platforms, where incentives such as discounts or seamless peer-to-peer transfers might encourage adoption. While not imminent, this possibility reinforces concerns that consumer digital payments could increasingly migrate onto foreign-controlled monetary rails.

Beyond the retail sphere, the wholesale dimension has gained even greater strategic importance. EU institutions have increasingly linked the ECB’s work on wholesale CBDC – a form of central bank money used exclusively for interbank settlement – with the growing risks posed by dollar-denominated stablecoins in financial markets. The concern is that European banks might resort to US stablecoins to operate outside TARGET service hours (the EU’s existing high-value payment system) or for cross-border and cross-currency transactions – which are more strategically sensitive – where the efficiency and lower costs of foreign-issued digital assets could make them more attractive.

To avoid this outcome, the ECB has adopted a dual-track wholesale CBDC strategy. The first track is the PONTES project, which aims to create a bridge between distributed-ledger settlement platforms and TARGET. Its purpose is to ensure that tokenised assets – now increasingly traded on Digital Ledger Technology (DLT) systems – can still be settled in central bank money. The second track is APPIA, which goes a step further. Instead of merely connecting DLT systems to existing infrastructure, APPIA looks to test the native issuance and settlement of central bank money directly on DLT. This would enable fully digital and programmable wholesale transactions without relying on private stablecoin networks or foreign payment rails.

Together, PONTES and APPIA aim to ensure that innovation in tokenised and digital assets can occur on sovereign, euro-denominated rails. By offering a public and efficient alternative, these initiatives seek to prevent European banks and corporates from shifting settlement to US-denominated digital assets solely because such systems may appear faster or cheaper. In contrast to the Digital Euro, the CBDC initiative has received strong support from market participants and requires no legislative process. It has generally been presented as a modernisation of existing infrastructures, rather than a political transformation of public money. Yet beneath the technical framing lies a strategic aim: keeping central bank money at the core of the EU’s digitalising financial system.

Looking ahead

Taken together, these three tracks represent a coherent – yet reactive – strategy by EU authorities to guard against the perceived risks of the dollarisation of the EU economy, particularly through digital payment rails and monetary instruments. This strategy has become more explicit – and perhaps more urgent – following the introduction of the GENIUS Act, both because of regulatory competition and the White House’s explicit ambition to ensure Dollar dominance in international monetary affairs.

The first track – regulation – is most established but is considered by some as requiring strengthening. One of MiCA’s objectives was to limit the capacity for US-dollar stablecoins to be used for domestic retail payments in the EU. While there seems to be little appetite in Brussels or among national capitals to reopen MiCA at this stage – and its statutory review is scheduled for 2026 – the ECB’s recent concern about the robustness of MiCA reflects a desire among some EU institutions to strengthen the regulatory framework defending the EU against dollarisation. Notably, proposals for strengthening this track focus on backing assets or reserves of the EU-issued stablecoins rather restrictions on the use of tokens themselves, suggesting that the perceived risk lies in the potential loss on traditional assets than in the use of their new digital representations.

The second track involves fostering private sector ‘solutions’ to the risk of dollarisation, particularly by supporting the growth of EU stablecoin issuers. This includes initiatives led by consortia of banks and traditional financial actors, as well as by new start-ups. Although MiCA’s regulatory clarity provides a favourable environment, the absence of a unified capital market – including the lack of a common EU safe asset comparable to US Treasuries – continues to hinder the development of such issuers.

Finally, the ECB and associated central banks continue to work on public sector solutions through the Digital Euro and CBDC initiatives. While these are longer-term projects and their eventual uptake remains uncertain, from the perspective of EU institutions they may provide a necessary public backstop to reduce the risk of dollarisation.

What stands out across all three tracks is their reactive and protective nature. The earlier discussion of leveraging ‘the Brussels effect’, achieving first-mover advantage through MiCA, or promoting the use of the Euro internationally via a digital currency as part of Strategic Autonomy, have largely reduced. At this point, EU action appears primarily focused on containing the reach of the US Dollar. In that – perhaps – we can see the effects of the GENIUS Act.


Andrew Whitworth is Visiting Fellow at the European University Institute (EUI) and Adjunct Professor at IE University in Madrid. Nicola Bilotta is the coordinator of the EU-Supervisory Digital Finance Academy and a research associate at the Florence School of Banking and Finance, European University Institute (EUI). He is also Associate Fellow at IAI.
Paper produced in the framework of the IAI-Intesa Sanpaolo Partnership. The views expressed in this report are solely those of the authors.

[1] White House, Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law, 18 July 2025, https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law.

[2] J.P. Morgan Global Research, What to Know about Stablecoins, 4 September 2025, https://www.jpmorgan.com/insights/global-research/currencies/stablecoins.

[3] ECB website: Digital Euro, https://www.ecb.europa.eu/euro/digital_euro/html/index.en.html.

[4] ESRB, ESRB Publishes Report on Systemic Risks from Crypto-Assets and Issues Recommendation on Stablecoins, 20 October 2025, https://www.esrb.europa.eu/news/pr/date/2025/html/esrb.pr251020~84e90ccc73.en.html.

[5] For example, Section 4 of the Genius Act states that reserves must comprise ‘US currency or coins’ or reserves at the Fed or US commercial banks, or US Treasury bills. See US Congress, S.1582 - GENIUS Act, https://www.congress.gov/bill/119th-congress/senate-bill/1582/text.

[6] European Securities and Markets Authority (ESMA), Markets in Crypto-Assets Regulation (MiCA), 8 December 2025, https://www.esma.europa.eu/node/201529.

[7] The ECB argues that tokens issued outside the EU – but fungible with EU-issued tokens of the same ‘multi-issued’ stablecoin – could, in the event of a ‘run’ on non-EU tokens, drain EU-based reserved assets used to back the stablecoin. The European Commission, however, denies this is a risk. See Munster, Ben and Giovanna Faggionato, “Commission Livid as ECB Warns of Crypto Apocalypse under Trump”, in Politico EU, 22 April 2025, https://www.politico.eu/?p=6482181; ECB, Letter from the ECB President to Mr Fabio De Masi, MEP, 26 September 2025, https://www.ecb.europa.eu/pub/pdf/other/ecb.mepletter250926_De_Masi~42f2dffd85.fi.pdf.

[8] Howcroft, Elizabeth, “Existing EU Crypto Rules Address Stablecoin Risk, Banking Regulator Says”, in Reuters, 12 November 2025, https://www.reuters.com/sustainability/boards-policy-regulation/existing-eu-crypto-rules-address-stablecoin-risk-banking-regulator-says-2025-11-12.

[9] Lagarde, Christine, “This Is Europe’s ‘Global Euro’ Moment”, in Financial Times, 17 June 2025, https://www.ft.com/content/4d5dea18-bc4b-4ccf-94d3-1973fd1467cc.