US Digital Asset Strategy and the European Response

This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 23 June 2025.

Executive Summary

The Digital Asset Strategy (henceforth, DAS) laid out in two recent US President’s executive orders involves three main actions:

• Assigning a new government task force to regulate cryptocurrency markets, with a view to making the United States the centre of digital financial technology innovation
• Building a governmental reserve of crypto assets, with the purpose of centralising, securing, or maximising their value
• Prohibiting US agencies from establishing, issuing and promoting CBDCs in the US and abroad

DAS is a major policy initiative, reminiscent in certain respects of President Nixon’s 1971 decision to untie the dollar from gold. If pursued consistently over the years – something we regard as uncertain – it may change the face of the US monetary and financial sector with profound, probably adverse, implications for the dollar’s international role.

We focus on a key objective of DAS: promoting the development and use of dollar-based stablecoins. Exchanged on blockchains like cryptocurrencies such as Bitcoin, stablecoins are pegged to remain close in value to the US dollar. Though not offering a clear enhancement on the existing payment infrastructure, if actively promoted, stablecoins could end up replacing, fully or partly, traditional payment instruments settled and overseen by the central bank. If so, the Fed’s oversight function and monetary control mechanism would be weakened. Since stablecoins oscillate in value, though normally by small amounts, and are at risk of runs due to their uncertain backing, the unicity of the dollar as unit of account would also be jeopardised, and the possibility of runs also adds a source of financial instability.

Concern has been expressed that the promotion of dollar-backed stablecoins may threaten Europe’s “monetary sovereignty”. Monetary sovereignty is seen as depending on two conditions:

• dominant use of the domestic currency for transactions and contract denomination
• existence of effective monetary policy instruments

Neither of these conditions would be endangered by a greater diffusion of dollar-denominated stablecoins, unless either of two situations materialise:

• the euro area (or parts of it) “dollarises”; or
• euro-backed stablecoins replace traditional payment instruments overseen and settled by the central bank.

We suggest ways in which the legal tender status of the euro and the EU crypto markets regulation (MiCA) could be adjusted to contain these risks. In addition, the risk of stablecoins weakening financial stability in the US makes the monitoring by regulators of European institutions’ exposure to foreign shocks more relevant than it already is.

It has been argued that the digital euro in preparation at the ECB would protect Europe’s monetary sovereignty against DAS or other risks. We tend to disagree. “Dollarisation”, an exceedingly unlikely outcome, especially if the euro’s legal status is properly established, would not in any case be prevented by the digital euro: an instrument constrained by design to be in small supply and whose commercial success is uncertain. Merits and drawbacks of the digital euro remain actively debated on other grounds; in our view, a wholesale version of it would be beneficial. However, protecting monetary sovereignty does not add significantly to the balance of arguments for or against a retail digital euro as currently planned.

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.

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