German Central Bank Chief Backs Stablecoins, CBDCs For Europe’s Payment Independence

The President of the German central financial institution has supported using euro-pegged stablecoins and Central Bank Digital Currencies (CBDCs) to guard the bloc’s funds independence.

Bundesbank Chief Pushes For Stablecoins, CBDCs

On Monday, Joachim Nagel, President of the Deutsche Bundesbank, touted euro-pegged stablecoins and CBDCs as strategic instruments for decreasing the European Union’s (EU) reliance on the US greenback (USD).

In a speech on 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 financial development and decreased competitiveness during the last couple of years.

As a end result, the German Central Bank’s chief affirmed that Europe should take “decisive” measures to spice up its financial dynamic, specializing in supporting the worldwide function of the euro and making the EU “extra unbiased when it comes to fee methods and options.”

He highlighted the bloc’s efforts with CBDCs, noting that “Currently, the Eurosystem is working exhausting on the introduction of the digital euro – a retail central financial institution digital forex, or CBDC. This would be the first pan-European retail digital fee resolution, primarily based solely on European infrastructures.”

Additionally, Nagel emphasised the function of stablecoins, reaffirming that he sees advantage in euro-denominated stablecoins for cross-border funds by each people and corporations at a decrease value.

Last week, he outlined the advantages of the fiat-pegged tokens at a dinner speech on the Euro50 Group assembly. The Bundesbank president famous that stablecoins open the door for programmable transactions and will facilitate cross-border funds by decreasing the transaction prices and period.

However, he additionally mentioned the potential European financial coverage challenges within the new geopolitical setting, together with central financial institution independence and the rise of US-denominated stablecoins.

European Sovereignty At Risk

According to Nagel, the rise of stablecoins might pose risks for the EU if the digital property, notably these denominated in a international forex, change into broadly used as technique of fee and retailer of worth within the euro space.

He famous that the US, below the Trump administration, has been selling the event of the crypto trade by engaged on establishing a transparent regulatory framework that protects clients and fosters innovation.

Notably, US President Donald Trump signed into legislation the Guiding and Establishing National Innovation for U.S. Stablecoins Act, also referred to as the GENIUS Act, final July, providing a authorized framework for issuers to function throughout the US.

Since then, the sector has seen robust development, with its market capitalization rising practically 50% final yr from $205 billion in the beginning of the yr to over $300 billion in late 2025. Nonetheless, a lot of the market is dominated by USD-denominated stablecoins, whereas the share of euro-pegged tokens accounts for lower than 1%.

“Thus, if this market composition persists, a hypothetical substitute of a home forex with stablecoins could be equal to a dollarization of the corresponding economic system,” the Bundesbank Chief defined. “In this state of affairs, the effectiveness of home financial coverage could possibly be severely impaired, to not point out that European sovereignty could possibly be weakened.”

Nagel asserted that the risk of this state of affairs materializing is small, however added that authorities are exploring methods to leverage new technological alternatives to scale back its chance.

He advocated for a wholesale CBDC to permit institutional actors on monetary markets to execute programmable transactions in central financial institution cash. In addition, they might assist DLT-based fee devices indirectly associated to central financial institution cash, equivalent to tokenized deposits and euro-denominated stablecoins.

To him, “these measures will permit us to utilise cutting-edge digital applied sciences to take care of our financial coverage effectiveness in an unsure geopolitical future. Additionally, they may improve our sovereignty.”