EU Irked by US Dollar Stablecoins, China Stifles Stablecoin Buzz

Stablecoins, the digital currencies pegged to fiat to tame crypto’s wild swings, are no longer just a niche tech experiment—they’re a geopolitical flashpoint. With US dollar-denominated tokens dominating the $271 billion market, the European Union is sounding alarms over monetary sovereignty, while China slams the brakes on earlier enthusiasm due to scams. Meanwhile, the US doubles down with new initiatives. This isn’t just about money; it’s about power, control, and the future of finance.

• US Dollar Dominance: Dollar-pegged stablecoins like USDT and USDC hold 99% of the $271 billion market, dwarfing euro alternatives.
• EU Resistance: The ECB warns of financial risks, as a new euro stablecoin, EURAU, enters the fray under strict MiCA rules.
• China’s Crackdown: Scams and capital flight fears cool stablecoin hype, stalling earlier yuan-based ambitions.

Stablecoin Basics: What’s at Stake?

For the uninitiated, stablecoins are cryptocurrencies designed to maintain a steady value by being tied to assets like the US dollar or euro, unlike Bitcoin’s rollercoaster price swings. They’re the digital cash of the crypto world, used for payments, savings, and as a stable bridge in decentralized finance (DeFi)—a borderless ecosystem of lending, borrowing, and trading without banks. But when nearly all of that digital cash—99% of a $271 billion market—is tied to the US dollar through titans like Tether’s USDT ($165 billion market cap) and Circle’s USDC ($66.4 billion), it’s not just a tech story. It’s a global power play, as seen in discussions around stablecoin dominance. Euro-denominated stablecoins, like Circle’s EURC or Stasis Euro’s EURS, limp along at a mere 0.2%, scraping together $484 million to $587 million. This lopsided reality has central banks and regulators sweating, and for good reason.

US Dollar Stablecoins: A Financial Juggernaut

In the US, stablecoins aren’t just embraced—they’re a strategic weapon to extend dollar dominance into the digital age. The recently passed GENIUS Act, signed into law on July 18, 2025, paves the way for seamless integration with traditional finance, encouraging giants like Visa and Mastercard to plug stablecoins into their payment rails. Analysts at the Bank for International Settlements (BIS) predict this could balloon the stablecoin market to $2 trillion by 2028, mostly under the dollar’s banner. Coinbase, a leading US crypto exchange, is fueling this fire with the relaunch of its Stablecoin Bootstrap Fund on August 12, 2025, aimed at pumping USDC liquidity into DeFi protocols like Aave, Morpho, Kamino, and Jupiter across networks such as Ethereum and Solana. Why USDC? It’s more transparent and regulated than Tether’s USDT, which has long faced scrutiny over reserve opacity—think murky accounting that’s sparked lawsuits and distrust. USDC undergoes regular audits, a fact that Bernstein analysts believe could make it the darling of US regulators and traditional finance, potentially overtaking USDT’s lead in domestic markets.

But Tether isn’t rolling over. CEO Paolo Ardoino announced plans for a new US-focused stablecoin by late September 2025, distinct from USDT’s role as a dollar proxy in emerging economies. This token targets payments and chequing accounts, a direct jab at American financial use cases. Ardoino, shrugging off rivalry with Circle’s Jeremy Allaire, quipped,

“We are very different companies.”

Sure, Paolo, but with USDT at $165 billion and USDC at $66.4 billion, the numbers tell a cage match story. The US strategy, as flagged by ECB sources, isn’t subtle—executive orders and congressional testimony reveal an explicit goal to cement dollar hegemony through digital currencies. It’s less innovation, more digital mercantilism. And while that’s a win for US influence, it’s a gut punch to regions fighting to keep their own currencies relevant, sparking debates on the geopolitical impact of dollar stablecoins.

Europe’s Sovereignty Battle: Fighting Dollarization

Over in Europe, the rise of dollar stablecoins isn’t a trend—it’s a crisis. The European Central Bank (ECB) dropped a bombshell warning on July 31, 2025, through adviser Jürgen Schaaf, who didn’t hold back on the risks to financial stability and the euro’s global standing.

“If dollar-denominated stables make further encroachments on euro territory, whether for payments, savings or settlement, the ECB’s control over monetary conditions could be weakened,”

Schaaf wrote in an ECB blog post, as detailed in ECB’s analysis of dollar stablecoin threats. What does that mean? Monetary policy—how central banks manage money supply and interest rates to steer inflation and growth—could slip from the ECB’s hands if Europeans ditch euros for USDT or USDC in everyday transactions. Worse, it could jack up financing costs and tie Europe geopolitically to the US, a nightmare for a region hell-bent on making the euro a dollar rival. Schaaf urged action, stating,

“Europe must take decisive action to emerge stronger from these turbulent times.”

The Centre for Economic Policy Research doubled down, branding this US “crypto-mercantilism”—a modern twist on economic imperialism.

Europe’s response is two-pronged. First, there’s EURAU, Germany’s first fully regulated euro stablecoin, launched on July 31, 2025, by AllUnity—a joint venture of Deutsche Bank’s DWS, Galaxy Digital, and Flow Traders. Built on Ethereum with plans for other blockchains, EURAU adheres to the EU’s Markets in Crypto-Assets Regulation (MiCA), a strict framework rolled out in mid-2024 that demands transparency and cash reserves to protect users. AllUnity CEO Alexander Höptner called it

“a significant step forward for Europe’s digital financial infrastructure and financial sovereignty.”

Bullish Europe became the first exchange to list EURAU, and there’s a flicker of hope—euro stablecoins have grown 60% in market cap since December 2024, from $367 million to $587 million, with more on EURAU’s launch and MiCA compliance. Still, that’s pocket change against dollar titans. Second, the ECB is pushing a digital euro, a central bank digital currency (CBDC) to counter dollarization head-on. But here’s the rub: MiCA’s tough rules, while ensuring safety, might stifle growth compared to the US’s looser GENIUS Act. Europe’s playing catch-up in a game already stacked against it, especially when considering regulatory differences between the EU and US.

China’s Dilemma: Innovation vs. Control

Halfway across the world, China’s stablecoin story is a rollercoaster of promise and paranoia. Early buzz centered on an offshore yuan-based stablecoin linked to the Belt & Road Initiative, a massive global infrastructure project to boost Chinese influence. Blockchain firm Conflux, alongside partners like Eastcompeace Technology and TokenPocket, spearheaded this, eyeing a digital yuan alternative for cross-border trade. People’s Bank of China (PBoC) Governor Pan Gonsheng initially nodded to the potential, noting stablecoins are

“reshaping the traditional payment infrastructure”

and that China

“can’t afford to ignore these changes.”

But the mood flipped fast. A surge of illicit fundraising scams—fraudsters exploiting public ignorance of digital assets—has regulators on edge, as highlighted in reports on China’s stablecoin scam crackdown. Beyond scams, there’s the specter of capital flight. Capital controls, rules limiting how money flows out of the country to stabilize the economy, are sacred in China. Stablecoins could let funds slip past these barriers, a dealbreaker for a regime obsessed with financial lockdown, as noted in discussions on China’s capital control concerns. The China Securities Regulatory Commission and PBoC reportedly ordered brokerages to cancel stablecoin seminars and hush public chatter, effectively icing the hype. It’s a textbook clash: innovation versus control, with control winning for now.

Hong Kong, often a sandbox for China’s broader policies, is inching forward more cautiously. Its Stablecoin Ordinance, effective August 1, 2025, aims to regulate the space, but the Hong Kong Monetary Authority (HKMA) will issue only a handful of licenses, with the first not expected until early 2026. That’s a snail’s pace against the US’s freight train momentum, leaving Asia’s financial hub playing a waiting game while dollar stablecoins tighten their grip.

Stablecoins vs. Bitcoin: A Decentralization Debate

For Bitcoin maximalists like many of us here, stablecoins can feel like a betrayal of the decentralized dream. Bitcoin is trustless money—no banks, no middlemen, no fiat ties. Stablecoins? They’re tethered to fiat reserves and run by centralized issuers like Tether or Circle, vulnerable to the same old financial gatekeepers BTC was built to escape. A USDT depegging or regulatory clampdown could tank markets without the resilience of Bitcoin’s distributed network. Yet, let’s not be purists to a fault. Stablecoins fill gaps Bitcoin doesn’t touch—daily payments, DeFi liquidity, and a stable on-ramp for the risk-averse. They’re a pragmatic stepping stone, greasing the wheels of adoption while BTC remains the ultimate store of value. The question isn’t whether they belong; it’s whether their centralized baggage will drag the crypto revolution back to square one with Silicon Valley suits as the new overlords. That’s a tension worth wrestling with.

Risks and Rewards: A Double-Edged Sword

Stablecoins aren’t a silver bullet—they’re a loaded gun. The BIS warns their pegs aren’t ironclad; a major break could ripple through DeFi and traditional finance, where stablecoins are increasingly entangled via custody and derivatives. Look at TerraUSD (UST) in 2022—its collapse wiped out $40 billion in value overnight, tanking DeFi protocols and shaking investor faith. If USDT, with its $165 billion market cap and spotty transparency history, ever stumbles, the fallout could be catastrophic. The ECB flags another risk: dollar stablecoins as tools for capital flight in emerging markets, destabilizing local economies while fattening US Treasury holdings. It’s not theoretical—it’s a contagion waiting if oversight lags, a concern echoed in debates on stablecoins and monetary sovereignty.

But let’s play devil’s advocate. Stablecoins also democratize finance in ways Bitcoin can’t match yet. In underbanked regions like Latin America or Africa, USDT acts as a dollar proxy for millions locked out of traditional banking, dodging hyperinflation and currency controls. They’re a lifeline for remittances and trade, embodying the freedom and efficiency we champion in decentralization. Even in DeFi, stablecoins enable yields through lending and borrowing on Ethereum or Solana—blockchains that, while not Bitcoin, power smart contracts BTC lacks. The tech isn’t perfect, but it’s accelerating access. The trick is balancing that promise against the scams and systemic risks lurking in the shadows. For every EURAU or yuan stablecoin carving a niche, ten frauds are waiting to fleece the naive. Vigilance isn’t optional; it’s mandatory.

What This Means for Crypto’s Future

Stablecoins are rewriting the rules of money, payments, and power, but they’re a messy revolution. The US is playing hardball, leveraging dollar tokens to lock in global dominance. Europe’s scrapping to keep the euro relevant with EURAU and a digital euro, but MiCA’s red tape might kneecap its own efforts. China’s trapped between global ambition and domestic paranoia, stifling innovation to protect control. For crypto enthusiasts, this isn’t a sideshow—it’s the frontline of finance 2.0. Stablecoins may not embody Bitcoin’s pure decentralized ethos, but they’re a bridge to mass adoption, filling niches from DeFi to remittances. The real question is whether they’ll liberate finance or just trade old central bankers for new tech moguls. Stay sharp—this wild frontier demands both optimism and a relentless demand for proof. Ignoring the stakes would be as foolish as betting against the internet in ’95, a sentiment shared in broader coverage of EU and China’s stablecoin tensions.

Key Takeaways and Questions on Stablecoin Dynamics

• Why are US dollar stablecoins dominating the crypto market?

  They control 99% of the $271 billion market with tokens like USDT ($165 billion) and USDC ($66.4 billion), reflecting the dollar’s global economic clout and US regulatory support via the GENIUS Act.

• What threat do dollar stablecoins pose to Europe’s monetary sovereignty?

  They could erode the ECB’s grip on monetary policy—managing money supply and rates—if Europeans adopt USDT or USDC over euros, raising financing costs and creating geopolitical reliance on the US.

• How is the EU countering US stablecoin dominance?

  By launching EURAU, a MiCA-compliant euro stablecoin by AllUnity, pushing a digital euro, and advocating global regulatory coordination to curb dollarization risks.

• Why has China scaled back stablecoin enthusiasm?

  Illicit fundraising scams and fears of evading capital controls—rules limiting money outflows—have led regulators to halt seminars and public discussion, prioritizing control over innovation.

• What is Coinbase doing to boost USDC, and why?

  Coinbase relaunched its Stablecoin Bootstrap Fund on August 12, 2025, to deepen USDC liquidity in DeFi on platforms like Aave and Solana, betting on its regulatory transparency to outpace Tether’s USDT in the US.

• What are Tether’s plans for the US market?

  Tether aims to launch a US-focused stablecoin by late September 2025 for payments and chequing accounts, unlike USDT’s global role as a dollar substitute in emerging markets.

• How does regulatory divergence between the US and EU impact stablecoins?

  The US GENIUS Act fuels adoption by linking stablecoins to traditional finance, while the EU’s stricter MiCA slows euro alternatives, potentially entrenching dollar dominance.

• What are the risks of stablecoin growth in crypto markets?

  Peg fragility could trigger collapses like TerraUSD in 2022, risking DeFi and traditional finance contagion, especially if giants like USDT falter due to transparency issues.

• What benefits do stablecoins offer despite the risks?

  They enable financial inclusion in underbanked regions like Latin America, act as stable DeFi liquidity, and support cross-border payments, accelerating access to digital finance.

• How do stablecoins compare to Bitcoin’s decentralized vision?

  Unlike Bitcoin’s trustless model, stablecoins rely on centralized issuers and fiat reserves, risking new forms of control, though they fill practical gaps Bitcoin doesn’t address yet.