Trump crypto push could hurt Europe’s financial stability: Top EU official

Concerns are mounting within the European Union regarding potential threats to financial stability and monetary sovereignty posed by the U.S. embrace of digital assets under the leadership of former President Donald Trump. European Stability Mechanism (ESM) managing director Pierre Gramegna articulated these worries during a Eurogroup press conference on March 10, underscoring how a favorable U.S. stance toward cryptocurrencies and dollar-denominated stablecoins might significantly impact the eurozone.

Gramegna noted that the “US crypto pivot” could spark tech giants to revisit plans for widespread payment solutions anchored in dollar-pegged stablecoins. Success in this area could undermine the euro area’s monetary control, a fundamental concern for European financial authorities. In light of this, Gramegna emphasized the urgency of advancing the digital euro, arguing that it is now more critical than ever for safeguarding Europe’s strategic autonomy.

Echoing Gramegna’s sentiments, Irish finance minister Paschal Donohoe highlighted the implications that developments in U.S. policy could have across the Atlantic. He linked these issues directly to the autonomy of the European currency and asserted the necessity of creating a European central bank digital currency (CBDC) to maintain a competitive edge against international financial developments.

In February, the European Central Bank (ECB) advanced its CBDC initiatives, announcing plans to enhance its digital payment framework to enable institutions to settle transactions. The ECB has been actively exploring various dimensions of CBDC since 2020, including the prospects of a retail digital euro aimed at consumers and wholesale solutions designed for interbank settlements.

Amid these developments, Trump enacted an executive order in January aimed at establishing a crypto working group, explicitly opposing the creation of a Federal Reserve CBDC. This stance illustrates a clear divergence in the approach to digital currencies between the U.S. and Europe, with European authorities pushing for innovation while U.S. policies seem to favor regulatory caution.

Additionally, the ECB has expressed consistent skepticism regarding the incorporation of cryptocurrencies like Bitcoin into its monetary framework. President Christine Lagarde has stated unequivocally that central bank reserves must remain “liquid, secure and safe,” dismissing the notion of including crypto assets. In late January, she reiterated confidence that Bitcoin would not find a place within the reserves of EU banks, reinforcing a conservative stance on digital currency management.

These developments underline a crucial juncture in which international financial policies and digital asset frameworks are evolving. As Europe seeks to bolster its digital currency initiatives amidst growing global competition, the pressure to innovate while preserving monetary control has never been more palpable.