The President of the German central bank has supported the use of euro-pegged stablecoins and Central Bank Digital Currencies (CBDCs) to protect the bloc’s payments independence.
Bundesbank Chief Pushes For Stablecoins, CBDCs
On Monday, Joachim Nagel, President of the Deutsche Bundesbank, touted euro-pegged stablecoins and CBDCs as strategic tools for reducing the European Union’s (EU) reliance on the US dollar (USD).
In a speech at the New Year’s Reception of the American Chamber of Commerce in Frankfurt, Nagel highlighted that Europe has been affected by geoeconomic fragmentation, which has slowed the bloc’s economic growth and decreased competitiveness over the last couple of years.
As a result, the German Central Bank’s chief affirmed that Europe must take “decisive” measures to boost its economic dynamic, focusing on supporting the international role of the euro and making the EU “more independent in terms of payment systems and solutions.”
He highlighted the bloc’s efforts with CBDCs, noting that “Currently, the Eurosystem is working hard on the introduction of the digital euro – a retail central bank digital currency, or CBDC. This will be the first pan-European retail digital payment solution, based solely on European infrastructures.”
Additionally, Nagel emphasized the role of stablecoins, reaffirming that he sees merit in euro-denominated stablecoins for cross-border payments by both individuals and firms at a lower cost.
Last week, he outlined the benefits of the fiat-pegged tokens at a dinner speech at the Euro50 Group meeting. The Bundesbank president noted that stablecoins open the door for programmable transactions and could facilitate cross-border payments by reducing the transaction costs and duration.
However, he also discussed the potential European monetary policy challenges in the new geopolitical environment, including central bank independence and the rise of US-denominated stablecoins.
European Sovereignty At Risk
According to Nagel, the rise of stablecoins could pose risks for the EU if the digital assets, particularly those denominated in a foreign currency, become widely used as means of payment and store of value in the euro area.
He noted that the US, under the Trump administration, has been promoting the development of the crypto industry by working on establishing a clear regulatory framework that protects customers and fosters innovation.
Notably, US President Donald Trump signed into law the Guiding and Establishing National Innovation for U.S. Stablecoins Act, also known as the GENIUS Act, last July, offering a legal framework for issuers to operate within the US.
Since then, the sector has seen strong growth, with its market capitalization rising nearly 50% last year from $205 billion at the start of the year to over $300 billion in late 2025. Nonetheless, most of the market is dominated by USD-denominated stablecoins, while the share of euro-pegged tokens accounts for less than 1%.
“Thus, if this market composition persists, a hypothetical replacement of a domestic currency with stablecoins would be equivalent to a dollarization of the corresponding economy,” the Bundesbank Chief explained. “In this scenario, the effectiveness of domestic monetary policy could be severely impaired, not to mention that European sovereignty could be weakened.”
Nagel asserted that the risk of this scenario materializing is small, but added that authorities are exploring ways to leverage new technological opportunities to reduce its likelihood.
He advocated for a wholesale CBDC to allow institutional actors on financial markets to execute programmable transactions in central bank money. In addition, they could support DLT-based payment instruments not directly related to central bank money, such as tokenized deposits and euro-denominated stablecoins.
To him, “these measures will allow us to utilise cutting-edge digital technologies to maintain our monetary policy effectiveness in an uncertain geopolitical future. Additionally, they will increase our sovereignty.”
The total crypto market capitalization is at $2.31 trillion in the one-week chart. Source: TOTAL on Tradingview
