As European Central Bank (ECB) President Christine Lagarde explained in a recent speech on the Future of Money, there is an argument that to remain relevant, Europe must respond by promoting euro-denominated stablecoins of its own.

“Otherwise, it [potentially] faces a future of digital dollarisation and a loss of monetary sovereignty,” said Lagarde in the speech, which was given at the Spanish central bank’s Latin America (Latam) Forum in Roda de Bará.

It’s a discussion even more pertinent for less powerful economic regions in Latam, Africa and elsewhere. In such markets, maintaining their currency’s status in a digital era – and thereby their sovereignty – against the powerful US dollar (USD), in stablecoin, or any other form, is more difficult.

Instead of trying to match USD stablecoin denomination flows, argued Lagarde, Europe should focus primarily instead on developing deeper, more integrated capital markets via the EU Savings and Investments Union (SIU) – pertinent to the monetary function of stablecoins.

Autonomy and control

For the technological and settlement function of stablecoins, the key question for Lagarde is less about which private instrument will prevail – be it fiat-linked coins, tokenised deposits, central bank digital currencies (CBDCs) or a yet-to-emerge alternative – and more about whether a common anchor is in place. In other words, central bank-issued money must dominate, whatever comes to pass.

Europe’s autonomy and capacity for independent growth was examined in a recent Treasury Today regional focus article, which also highlighted the Draghi report, and discussed the role of payment initiatives like the digital euro CBDC as a potential means of buttressing economic sovereignty.

The latter is particularly pertinent as stablecoins are a private form of digital currency and USD-centric. Most central bankers would like to see the digital tokenised coins come under better control – even though stablecoins are less volatile than unpegged cryptocurrencies like Bitcoin (BTC), which have no link back to a fiat currency.

Whether that enhanced control is achieved via alternative CBDCs or by regulating stablecoins themselves better, as Europe has with its Markets in Crypto-Assets Regulation (MiCAR), may be immaterial to the ECB. Either way, protecting the finality of central bank-issued money, which enables interest rate (IR)-setting economic control, is a key aim.

The Hong Kong Monetary Authority’s (HKMA) Regulatory Regime for Stablecoin Issuers performs a similar function for the Chinese in overseas markets, providing a regulatory framework for an evolving sector. Its ‘home’ Chinese market for stablecoins is effectively closed to international participants but Hong Kong allows it to play globally.

The US has its own GENIUS Act, of course. But many have argued that comes from a different regulatory space entirely to the EU, and indeed that it is partly designed to deepen USD’s position as the world’s reserve currency.

Asserting sovereignty

Against this backdrop, the ECB’s Pontes and Appia projects represent further attempts to assert European control and sovereignty in this digital arena. These wholesale central bank money settlement projects are respectively intended to synchronise distributed ledger technology (DLT) trading with the continent’s TARGET2-Securities (T2S) centralised settlement, and to investigate the emerging DLT ecosystem for wholesale markets.

Lagarde’s speech shows the laser-like focus that Europe presently has on these issues. So did a speech in June 2026 by her colleague Isabel Schnabel, which addressed the bank disintermediation angle vis-à-vis stablecoins and the potential implications for money market funds (MMF).

But despite all these European initiatives, ultimately the financial markets themselves will decide which stablecoins are adopted. Stablecoins are available here and now, unlike ‘public sector’ CBDCs. Additionally, regional regulations can only go so far in impacting the global arena.

As Alenka Grealish, Principal Analyst, Banking, at the Celent analyst firm observes: “In a free market, multination corporations (MNCs) – and their treasurers – will choose whichever stablecoin and/or tokenised deposit best meets their requirements.”