US and Europe show contrasting views on stablecoins, a form of digital currency

In the rapidly evolving world of digital finance, the United States and the European Union have adopted fundamentally different approaches to regulating stablecoins, with significant implications for the global financial structure.

The U.S., viewing stablecoins primarily as tools for innovation and expansion of consumer financial choice, has passed the Generating Revenue and Enhancing National Investment by Using Stablecoins Act (GENIUS Act). This light-touch regulatory framework requires stablecoins to be 100% backed by safe, liquid assets, undergo regular audits, and adhere to disclosure requirements. However, it allows smaller issuers (under $10 billion) to be regulated at the state level, potentially leading to regulatory fragmentation and arbitrage.

In contrast, the European Union's Markets in Crypto-Assets (MiCA) regulation, effective since 2024, adopts a much stricter and comprehensive framework. It imposes reserve requirements, governance standards, transparency, and quantitative prudential safeguards for stablecoin issuers, especially large ones. MiCA aims to "ring-fence" the EU’s financial and monetary system, emphasizing regulatory oversight, financial stability, and protecting the euro’s monetary sovereignty from erosion by dominant dollar stablecoins.

The divergence between these two approaches risks fragmenting the global stablecoin standards and regulation, potentially leading to jurisdictional arbitrage. It could reinforce U.S. dollar dominance in digital payments and stablecoins, challenge the euro’s internationalization, and increase geopolitical and regulatory competition over digital currency influence and monetary sovereignty.

The US Financial Stability Oversight Council has noted that stablecoins 'continue to represent a potential risk to financial stability because they are acutely vulnerable to runs absent appropriate risk management standards'. Weak reserve management by stablecoin issuers or trading platforms could trigger collateral fire sales during mass redemptions, potentially destabilizing other parts of the financial markets.

While the U.S. actively promotes stablecoin adoption and allows the Treasury Secretary to authorize foreign stablecoin issuers, the EU does not permit ad hoc authorization of foreign issuers but relies on supervisory cooperation agreements. This approach reinforces a more cautious stance toward international interoperability.

The US, under the Donald Trump administration, viewed stablecoins primarily as vehicles for innovation, tools to expand consumer choice, provide more efficient forms of financial intermediation, and help bolster dollar dominance globally. An executive order issued in January 2025 promoted stablecoins while explicitly prohibiting central bank digital currencies in the US.

Europe, on the other hand, is prioritizing tighter control over stablecoins, focusing on monetary sovereignty and the ability to implement effective monetary policy in a digital world. This has raised concerns about regulatory arbitrage and the potential for inconsistent standards across jurisdictions.

In summary, the U.S. promotes stablecoins as innovative means to extend financial intermediation and sustain dollar hegemony globally, while the EU prioritizes strict oversight to preserve financial stability and protect the euro’s sovereignty. This transatlantic regulatory divergence is shaping the evolving global digital financial architecture with significant strategic consequences.

The divergent approaches towards stablecoin regulation in the U.S. and EU potentially expose the global financial structure to jurisdictional arbitrage.
The GENIUS Act in the U.S., while promoting innovation and consumer financial choice, can lead to regulatory fragmentation due to its state-level regulation for smaller issuers.
The European Union's MiCA regulation, on the other hand, emphasizes stricter requirements for stablecoin issuers to strengthen the EU’s financial and monetary system.
Weak reserve management by stablecoin issuers or trading platforms, as highlighted by the U.S. Financial Stability Oversight Council, could destabilize other parts of the financial markets.
The U.S., under the Trump administration, considered stablecoins as vehicles for innovation, tools to expand consumer choice, and means to bolster dollar dominance globally.
The EU, in contrast, prioritizes tighter control over stablecoins to preserve financial stability and protect the euro’s sovereignty, raising concerns about potential regulatory arbitrage.
AI-driven research and insights on public data in the fields of finance, investing, and business can provide valuable insights into the risks and benefits of different stablecoin frameworks.
The evolving transatlantic regulatory divergence in digital finance reflects contrasting policy priorities in U.S. and EU politics, with implications for general-news readers.
The digitalisation of finance, including stablecoins, is reshaping the global financial landscape, requiring ongoing research, policy discussions, and strategic decision-making in technology, finance, and politics.