Financial officials in the European Union are growing apprehensive as US President Donald Trump’s endorsement of digital currencies raises worries over Europe’s financial stability and autonomy. Pierre Gramegna, managing director of the European Stability Mechanism (ESM), expressed concern at a recent Eurogroup press conference that the US’s inclination towards dollar-pegged digital currencies, known as stablecoins, could pose significant issues for Europe.
Gramegna voiced fears that the US’s shift towards crypto could inspire foreign and US tech firms to create mass payment solutions powered by dollar-denominated stablecoin. If successful, this development could pose a threat to Europe’s financial sovereignty and stability. To protect Europe’s strategic autonomy, Gramegna emphasized the need for the European Central Bank (ECB) to push toward making the digital euro a reality.
The Irish Finance Minister, Paschal Donohoe, echoed the sentiment that changes in foreign policies, such as the USA’s, could significantly impact Europe. He stressed the need for the development of a European central bank digital currency (CBDC) to maintain Europe’s autonomy and the resilience of its currency. The ECB has been exploring the CBDCs since 2020, including a retail digital euro for consumers and a cross-border settlement system for central banks.
However, Trump opposes a Federal Reserve CBDC, and in January signed an executive order to establish a crypto task force while simultaneously banning the formation and use of a US CBDC. In the meantime, the ECB has declined to add Bitcoin to its monetary reserves and prohibited other European central banks from doing so. Christine Lagarde, the ECB President, has maintained that bank reserves must be “liquid, secure, and safe,” indicating that they will not include digital assets.