Non-technical summary of ESM Working Paper 79: Global stablecoins in 2030: a European perspective

Stablecoins have moved from a niche crypto innovation to a topic at the centre of debates about the future of money. Their market capitalisation has grown rapidly and could expand further over the coming years. If that happens, stablecoins could influence how money moves through the financial system, how banks are funded, and which currencies are used in international transactions. For Europe, this also raises an important strategic question: will future growth in digital money reinforce the global role of the US dollar, or can the euro also benefit from this transformation? The paper examines these questions from a European perspective and assesses what large-scale stablecoin adoption could mean for the euro area's financial system.

To assess these potential effects, we use a "follow-the-money" approach that tracks how funds move between households, banks, governments, and financial institutions. We use a flow-of-funds framework that covers the United States, the euro area, and the rest of the world, and explores a range of scenarios for stablecoin adoption in 2030. These scenarios differ in the size of the stablecoin market, whether stablecoins are denominated in dollars or euros, where they are used, and how issuers invest the assets backing them. This approach allows understanding how stablecoins could reshape financial flows and balance sheets across the global economy.

Our main finding is that even under ambitious growth scenarios, stablecoins are unlikely to fundamentally disrupt the euro-area financial system. Rather than causing large-scale banking disintermediation, they would mainly reshape bank funding channels, replacing retail deposits with wholesale funding that is generally more concentrated, volatile, and costly, with effects differing across types of banks. Whether EU residents adopt euro- or dollar-denominated stablecoins does not materially change this overall result. At the same time, wider use of euro-denominated stablecoins could support demand for euro-denominated safe assets and strengthen the international role of the euro, whereas dollar stablecoins would reinforce demand for dollar assets.

Overall, the financial stability challenges appear manageable with appropriate regulation, considering that they are not of a fundamentally new nature. The paper concludes that Europe can strike a right balance between a robust regulatory framework safeguarding financial stability and monetary sovereignty while enabling innovation.