European Regulators Sound the Alarm on Dollar-Backed Stablecoins
Amid the rapid global expansion of crypto payment systems, European regulators have issued a warning over the growing dominance of U.S. dollar-backed stablecoins like USDT and USDC. The alert follows PayPal’s rollout of global crypto payments, which now enables users in over 30 countries to send and receive digital assets including PayPal USD (PYUSD), its own dollar-pegged stablecoin.
Officials at the European Central Bank (ECB) and members of the European Commission voiced concern that stablecoins pegged to the U.S. dollar are becoming de facto digital cash, threatening monetary sovereignty and undercutting the euro in global transactions.
“The EU cannot ignore the fact that over 90% of crypto stablecoin volumes are dollar-backed. This is not just a tech issue—it’s a monetary sovereignty issue,” said a senior EU official.
PayPal’s Expansion Accelerates the Shift
The timing of PayPal’s crypto payment feature has intensified the debate. With over 400 million users globally, the fintech giant’s integration of stablecoin transfers could potentially normalize the use of dollar-backed tokens across Europe, Latin America, and Asia.
“PYUSD will now work like Venmo or PayPal Cash, but on-chain,” said Jose Fernandez da Ponte, PayPal’s Head of Blockchain, during the announcement. “We’re enabling instant, cheap, borderless payments.”
The move is seen as a major boost for crypto adoption in everyday commerce, but also a warning bell for regions lacking their own robust digital currency frameworks.
EU’s CBDC Progress Lags Behind
The European Central Bank’s digital euro project remains in its pilot phase, with no official launch date. This has opened a gap in the digital payments space that American fintechs and dollar-backed stablecoins are increasingly filling.
While regulators previously focused on speculative crypto assets, attention has now shifted toward stablecoins as systemic financial instruments, especially with corporate giants like PayPal entering the scene.
What’s Next for Europe?
EU officials are calling for urgent legislation to ensure stablecoin providers are subject to MiCA (Markets in Crypto-Assets Regulation) and do not become dominant without proper oversight. Some proposals include:
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Caps on stablecoin circulation in the EU market
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Requirements for euro-based alternatives
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Restrictions on the use of foreign stablecoins in public-sector contracts
Analysts believe the growing tension could accelerate digital euro development, or even lead to state-backed euro stablecoins to compete with USDT, USDC, and PYUSD.
Final Thoughts
As PayPal expands its crypto footprint, Europe is now at a crossroads: either build competitive alternatives fast, or risk ceding financial sovereignty to Silicon Valley and Wall Street-backed crypto ecosystems.
The clash between innovation and control is reaching a boiling point—and stablecoins may be at the center of Europe’s next major economic debate.
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