In the fast-moving world of digital finance, few topics have moved from the fringe to the center of global policy as quickly as stablecoins. In just six years, this market has exploded from under $10 billion to over $300 billion today.
While these assets are primarily denominated in U.S. dollars and controlled by a few major entities, their deepening ties to the real financial system are raising eyebrows—especially regarding global financial stability. As we look toward 2026, the big question isn’t just “should stablecoins exist?” but rather, “what exactly are they for?”.
To navigate this landscape, we need to separate the monetary function of stablecoins from their technological function.
One Instrument, Two Very Different Roles
Stablecoins were originally built to solve price volatility within the crypto ecosystem, acting as a “bridge” to traditional fiat currencies. However, as they move into the mainstream, they are being asked to do two distinct things:
- The Monetary Role: Stablecoins are increasingly seen as a way to expand the global reach of reserve currencies. They bypass traditional “correspondent banking” networks, allowing value to move faster and with fewer intermediaries. For savers in countries with weak local currencies, stablecoins offer a digital “safe haven” that is easier to hold than physical cash.
- The Technological Role: This is about how we execute transactions. Modern innovation allows real-world assets to be “tokenized” on blockchains. For these systems to work, they need a “native” settlement asset that can move at the same speed as the code—something stablecoins currently provide through “atomic settlement” (instant, simultaneous exchange).
Does Europe Need Its Own Stablecoin?
There is a growing argument that Europe must promote Euro-denominated stablecoins to remain competitive and avoid “digital dollarization”. But when we look at the two functions separately, the case for a private Euro stablecoin looks a bit shaky.
On the Monetary Front: While Euro stablecoins might increase global demand for Euro assets, they come with heavy trade-offs. Stablecoins are private liabilities. If confidence in the issuer slips—as we saw during the 2023 Silicon Valley Bank collapse—the “peg” can break, causing systemic stress. Furthermore, if retail deposits move into non-bank stablecoins, it could weaken the ability of central banks to maintain price stability and influence the real economy.
On the Technological Front: The technology behind stablecoins is undeniably transformative. It offers a path to integrate Europe’s fragmented financial markets. However, relying on private stablecoins for settlement creates two structural weaknesses:
- Fragility: Private tokens lack the unconditional “finality” of central bank money.
- Fragmentation: Each competing stablecoin creates its own “silo,” breaking the promise of a single, interoperable financial environment.
Building the Infrastructure, Not Just the Instrument
The real solution isn’t just creating another private coin; it’s building public infrastructure.
Europe is already moving in this direction. Projects like “Pontes” are designed to link blockchain platforms directly to current settlement systems, ensuring transactions can be settled in safe, central bank money from day one. Looking further ahead, the “Appia” initiative aims to create a fully interoperable European digital financial ecosystem by 2028.
The Bottom Line
Are stablecoins necessary for a digital future? The answer depends on what you are trying to achieve.
For money to be truly effective, it needs solid foundations: integrated capital markets and safe assets. Private stablecoins can’t build those foundations for us. For settlement, the goal shouldn’t be to pick a winning private instrument, but to ensure there is a common, public “anchor”.
Europe’s mission isn’t to simply copy tools developed elsewhere. It’s to build the infrastructure that allows us to enjoy the benefits of innovation without importing the risks. We know where we are going—and we’re building the right path to get there.